Correlation Between International Growth and Mid Cap
Can any of the company-specific risk be diversified away by investing in both International 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 International 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 International Growth Fund and Mid Cap Index, you can compare the effects of market volatilities on International 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 International Growth with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Growth and Mid Cap.
Diversification Opportunities for International Growth and Mid Cap
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between International and Mid is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding International Growth Fund 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 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 International 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 Index has no effect on the direction of International Growth i.e., International Growth and Mid Cap go up and down completely randomly.
Pair Corralation between International Growth and Mid Cap
Assuming the 90 days horizon International Growth is expected to generate 2.44 times less return on investment than Mid Cap. In addition to that, International Growth is 1.24 times more volatile than Mid Cap Index. It trades about 0.02 of its total potential returns per unit of risk. Mid Cap Index is currently generating about 0.07 per unit of volatility. If you would invest 2,124 in Mid Cap Index on September 13, 2024 and sell it today you would earn a total of 833.00 from holding Mid Cap Index or generate 39.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
International Growth Fund vs. Mid Cap Index
Performance |
| Timeline |
| International Growth |
| Mid Cap Index |
International Growth and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Growth and Mid Cap
The main advantage of trading using opposite International Growth and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International 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.| International Growth vs. Mid Cap Index | International Growth vs. Mid Cap Strategic | International Growth vs. Valic Company I | International Growth vs. Valic Company I |
| Mid Cap vs. Lord Abbett Health | Mid Cap vs. The Gabelli Healthcare | Mid Cap vs. Delaware Healthcare Fund | Mid Cap vs. Invesco Global Health |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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