Correlation Between Short-term Government and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Short-term Government 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 Short-term Government and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Term Government Fund and Mid Cap Value, you can compare the effects of market volatilities on Short-term Government 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 Short-term Government with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Government and Mid Cap.
Diversification Opportunities for Short-term Government and Mid Cap
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Short-term and Mid is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund and Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Value and Short-term Government 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 Short Term Government Fund 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 Value has no effect on the direction of Short-term Government i.e., Short-term Government and Mid Cap go up and down completely randomly.
Pair Corralation between Short-term Government and Mid Cap
Assuming the 90 days horizon Short-term Government is expected to generate 2.48 times less return on investment than Mid Cap. But when comparing it to its historical volatility, Short Term Government Fund is 4.72 times less risky than Mid Cap. It trades about 0.05 of its potential returns per unit of risk. Mid Cap Value is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,607 in Mid Cap Value on August 26, 2024 and sell it today you would earn a total of 159.00 from holding Mid Cap Value or generate 9.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Term Government Fund vs. Mid Cap Value
Performance |
| Timeline |
| Short Term Government |
| Mid Cap Value |
Short-term Government and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short-term Government and Mid Cap
The main advantage of trading using opposite Short-term Government and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short-term Government 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.The idea behind Short Term Government Fund and Mid Cap Value pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Mid Cap vs. Janus Triton Fund | Mid Cap vs. New World Fund | Mid Cap vs. Fidelity Mid Cap | Mid Cap vs. Mfs Value Fund |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |