Correlation Between International Equities and Mid Cap
Can any of the company-specific risk be diversified away by investing in both International Equities 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 International Equities and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Equities Index and Mid Cap Index, you can compare the effects of market volatilities on International Equities 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 International Equities with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equities and Mid Cap.
Diversification Opportunities for International Equities and Mid Cap
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between INTERNATIONAL and Mid is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding International Equities Index and Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Index and International Equities 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 International Equities Index 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 Index has no effect on the direction of International Equities i.e., International Equities and Mid Cap go up and down completely randomly.
Pair Corralation between International Equities and Mid Cap
Assuming the 90 days horizon International Equities Index is expected to generate 0.67 times more return on investment than Mid Cap. However, International Equities Index is 1.48 times less risky than Mid Cap. It trades about 0.06 of its potential returns per unit of risk. Mid Cap Index is currently generating about 0.02 per unit of risk. If you would invest 703.00 in International Equities Index on November 19, 2024 and sell it today you would earn a total of 173.00 from holding International Equities Index or generate 24.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Equities Index vs. Mid Cap Index
Performance |
| Timeline |
| International Equities |
| Mid Cap Index |
International Equities and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equities and Mid Cap
The main advantage of trading using opposite International Equities and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equities 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.| International Equities vs. Small Pany Growth | International Equities vs. The Hartford Growth | International Equities vs. Transamerica Capital Growth | International Equities vs. L Abbett Growth |
| Mid Cap vs. Miller Vertible Bond | Mid Cap vs. Victory Incore Investment | Mid Cap vs. Harbor Vertible Securities | Mid Cap vs. Calamos Global Vertible |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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