Correlation Between Global Growth and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Global Growth 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 Global Growth and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Growth Fund and Mid Cap Value, you can compare the effects of market volatilities on Global Growth 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 Global Growth with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Growth and Mid Cap.
Diversification Opportunities for Global Growth and Mid Cap
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Global and Mid is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Global Growth 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 Global Growth 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 Global Growth 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 Global Growth i.e., Global Growth and Mid Cap go up and down completely randomly.
Pair Corralation between Global Growth and Mid Cap
Assuming the 90 days horizon Global Growth Fund is expected to generate 1.43 times more return on investment than Mid Cap. However, Global Growth is 1.43 times more volatile than Mid Cap Value. It trades about 0.13 of its potential returns per unit of risk. Mid Cap Value is currently generating about 0.18 per unit of risk. If you would invest 1,080 in Global Growth Fund on October 23, 2024 and sell it today you would earn a total of 23.00 from holding Global Growth Fund or generate 2.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Growth Fund vs. Mid Cap Value
Performance |
| Timeline |
| Global Growth |
| Mid Cap Value |
Global Growth and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Growth and Mid Cap
The main advantage of trading using opposite Global Growth and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Growth 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.| Global Growth vs. Emerging Markets Fund | Global Growth vs. International Growth Fund | Global Growth vs. Heritage Fund Investor | Global Growth vs. Select Fund Investor |
| Mid Cap vs. Heritage Fund Investor | Mid Cap vs. Equity Income Fund | Mid Cap vs. Small Cap Value | Mid Cap vs. Utilities Fund Investor |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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