Correlation Between Mid Cap and Walthausen Small
Can any of the company-specific risk be diversified away by investing in both Mid Cap and Walthausen Small 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 Walthausen Small 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 Walthausen Small Cap, you can compare the effects of market volatilities on Mid Cap and Walthausen Small 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 Walthausen Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Walthausen Small.
Diversification Opportunities for Mid Cap and Walthausen Small
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mid and Walthausen is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Index and Walthausen Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walthausen Small Cap 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 Walthausen Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walthausen Small Cap has no effect on the direction of Mid Cap i.e., Mid Cap and Walthausen Small go up and down completely randomly.
Pair Corralation between Mid Cap and Walthausen Small
Assuming the 90 days horizon Mid Cap Index is expected to generate 0.84 times more return on investment than Walthausen Small. However, Mid Cap Index is 1.19 times less risky than Walthausen Small. It trades about 0.07 of its potential returns per unit of risk. Walthausen Small Cap is currently generating about 0.05 per unit of risk. If you would invest 2,153 in Mid Cap Index on August 30, 2024 and sell it today you would earn a total of 848.00 from holding Mid Cap Index or generate 39.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Index vs. Walthausen Small Cap
Performance |
| Timeline |
| Mid Cap Index |
| Walthausen Small Cap |
Mid Cap and Walthausen Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Walthausen Small
The main advantage of trading using opposite Mid Cap and Walthausen Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Walthausen Small 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 Walthausen Small will offset losses from the drop in Walthausen Small's long position.| Mid Cap vs. T Rowe Price | Mid Cap vs. Metropolitan West High | Mid Cap vs. Calvert High Yield | Mid Cap vs. Artisan High Income |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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