Correlation Between Mid Cap and International Government
Can any of the company-specific risk be diversified away by investing in both Mid Cap and International Government 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 International Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Strategic and International Government Bond, you can compare the effects of market volatilities on Mid Cap and International Government 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 International Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and International Government.
Diversification Opportunities for Mid Cap and International Government
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Mid and International is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Strategic and International Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Government 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 Strategic are associated (or correlated) with International Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Government has no effect on the direction of Mid Cap i.e., Mid Cap and International Government go up and down completely randomly.
Pair Corralation between Mid Cap and International Government
Assuming the 90 days horizon Mid Cap Strategic is expected to generate 2.86 times more return on investment than International Government. However, Mid Cap is 2.86 times more volatile than International Government Bond. It trades about 0.04 of its potential returns per unit of risk. International Government Bond is currently generating about 0.03 per unit of risk. If you would invest 1,782 in Mid Cap Strategic on August 31, 2024 and sell it today you would earn a total of 409.00 from holding Mid Cap Strategic or generate 22.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Strategic vs. International Government Bond
Performance |
| Timeline |
| Mid Cap Strategic |
| International Government |
Mid Cap and International Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and International Government
The main advantage of trading using opposite Mid Cap and International Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, International Government 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 International Government will offset losses from the drop in International Government's long position.| Mid Cap vs. Victory Rs Small | Mid Cap vs. Qs Small Capitalization | Mid Cap vs. Legg Mason Partners | Mid Cap vs. Ab Small Cap |
| International Government vs. Goldman Sachs Clean | International Government vs. James Balanced Golden | International Government vs. Sprott Gold Equity | International Government vs. Franklin Gold Precious |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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