Correlation Between Inflation Linked and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Inflation Linked and Mid Cap at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Inflation Linked and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inflation Linked Fixed Income and Mid Cap Growth, you can compare the effects of market volatilities on Inflation Linked and Mid Cap and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Inflation Linked with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation Linked and Mid Cap.
Diversification Opportunities for Inflation Linked and Mid Cap
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Inflation and Mid is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Linked Fixed Income and Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Growth and Inflation Linked is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Inflation Linked Fixed Income are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Growth has no effect on the direction of Inflation Linked i.e., Inflation Linked and Mid Cap go up and down completely randomly.
Pair Corralation between Inflation Linked and Mid Cap
Assuming the 90 days horizon Inflation Linked is expected to generate 60.45 times less return on investment than Mid Cap. But when comparing it to its historical volatility, Inflation Linked Fixed Income is 7.0 times less risky than Mid Cap. It trades about 0.06 of its potential returns per unit of risk. Mid Cap Growth is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 936.00 in Mid Cap Growth on August 29, 2024 and sell it today you would earn a total of 221.00 from holding Mid Cap Growth or generate 23.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Inflation Linked Fixed Income vs. Mid Cap Growth
Performance |
| Timeline |
| Inflation Linked Fixed |
| Mid Cap Growth |
Inflation Linked and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inflation Linked and Mid Cap
The main advantage of trading using opposite Inflation Linked and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflation Linked position performs unexpectedly, Mid Cap can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Mid Cap will offset losses from the drop in Mid Cap's long position.| Inflation Linked vs. T Rowe Price | Inflation Linked vs. Metropolitan West High | Inflation Linked vs. Morningstar Aggressive Growth | Inflation Linked vs. Siit High Yield |
| Mid Cap vs. Pgim Conservative Retirement | Mid Cap vs. Calvert Moderate Allocation | Mid Cap vs. Target Retirement 2040 | Mid Cap vs. Franklin Moderate Allocation |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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