Correlation Between Growth Fund and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Growth Fund 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 Growth Fund and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund I and Mid Cap Value, you can compare the effects of market volatilities on Growth Fund 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 Growth Fund with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Mid Cap.
Diversification Opportunities for Growth Fund and Mid Cap
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Growth and Mid is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund I 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 Growth Fund 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 Growth Fund I 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 Growth Fund i.e., Growth Fund and Mid Cap go up and down completely randomly.
Pair Corralation between Growth Fund and Mid Cap
Assuming the 90 days horizon Growth Fund I is expected to generate 1.4 times more return on investment than Mid Cap. However, Growth Fund is 1.4 times more volatile than Mid Cap Value. It trades about 0.17 of its potential returns per unit of risk. Mid Cap Value is currently generating about 0.09 per unit of risk. If you would invest 5,885 in Growth Fund I on September 12, 2024 and sell it today you would earn a total of 596.00 from holding Growth Fund I or generate 10.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Fund I vs. Mid Cap Value
Performance |
| Timeline |
| Growth Fund I |
| Mid Cap Value |
Growth Fund and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and Mid Cap
The main advantage of trading using opposite Growth Fund and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund 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.| Growth Fund vs. American Funds The | Growth Fund vs. American Funds The | Growth Fund vs. Growth Fund Of | Growth Fund vs. Growth Fund Of |
| Mid Cap vs. SCOR PK | Mid Cap vs. Morningstar Unconstrained Allocation | Mid Cap vs. Thrivent High Yield | Mid Cap vs. Via Renewables |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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