Correlation Between Mid Cap and Global Strategy
Can any of the company-specific risk be diversified away by investing in both Mid Cap and Global Strategy 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 Mid Cap and Global Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Index and Global Strategy Fund, you can compare the effects of market volatilities on Mid Cap and Global Strategy 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 Mid Cap with a short position of Global Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Global Strategy.
Diversification Opportunities for Mid Cap and Global Strategy
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mid and Global is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Index and Global Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Strategy and Mid Cap 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 Mid Cap Index are associated (or correlated) with Global Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Strategy has no effect on the direction of Mid Cap i.e., Mid Cap and Global Strategy go up and down completely randomly.
Pair Corralation between Mid Cap and Global Strategy
Assuming the 90 days horizon Mid Cap Index is expected to generate 2.62 times more return on investment than Global Strategy. However, Mid Cap is 2.62 times more volatile than Global Strategy Fund. It trades about 0.26 of its potential returns per unit of risk. Global Strategy Fund is currently generating about 0.05 per unit of risk. If you would invest 2,797 in Mid Cap Index on August 27, 2024 and sell it today you would earn a total of 184.00 from holding Mid Cap Index or generate 6.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Index vs. Global Strategy Fund
Performance |
| Timeline |
| Mid Cap Index |
| Global Strategy |
Mid Cap and Global Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Global Strategy
The main advantage of trading using opposite Mid Cap and Global Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Global Strategy 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 Global Strategy will offset losses from the drop in Global Strategy's long position.| Mid Cap vs. Mid Cap Strategic | Mid Cap vs. Valic Company I | Mid Cap vs. Valic Company I | Mid Cap vs. Stock Index Fund |
| Global Strategy vs. Mid Cap Index | Global Strategy vs. Mid Cap Strategic | Global Strategy vs. Valic Company I | Global Strategy vs. Valic Company I |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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