Correlation Between Foreign Value and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Foreign Value 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 Foreign Value and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foreign Value Fund and Mid Cap Strategic, you can compare the effects of market volatilities on Foreign Value 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 Foreign Value with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foreign Value and Mid Cap.
Diversification Opportunities for Foreign Value and Mid Cap
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Foreign and Mid is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Foreign Value Fund and Mid Cap Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Strategic and Foreign Value 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 Foreign Value 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 Strategic has no effect on the direction of Foreign Value i.e., Foreign Value and Mid Cap go up and down completely randomly.
Pair Corralation between Foreign Value and Mid Cap
Assuming the 90 days horizon Foreign Value is expected to generate 2.08 times less return on investment than Mid Cap. But when comparing it to its historical volatility, Foreign Value Fund is 1.23 times less risky than Mid Cap. It trades about 0.08 of its potential returns per unit of risk. Mid Cap Strategic is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,616 in Mid Cap Strategic on September 3, 2024 and sell it today you would earn a total of 580.00 from holding Mid Cap Strategic or generate 35.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Foreign Value Fund vs. Mid Cap Strategic
Performance |
| Timeline |
| Foreign Value |
| Mid Cap Strategic |
Foreign Value and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Foreign Value and Mid Cap
The main advantage of trading using opposite Foreign Value and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foreign Value 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.| Foreign Value vs. Absolute Convertible Arbitrage | Foreign Value vs. Calamos Dynamic Convertible | Foreign Value vs. Rationalpier 88 Convertible | Foreign Value vs. Fidelity Sai Convertible |
| Mid Cap vs. Fidelity Sai Convertible | Mid Cap vs. Calamos Dynamic Convertible | Mid Cap vs. Advent Claymore Convertible | Mid Cap vs. Lord Abbett Convertible |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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