Correlation Between Mid Cap and Value Fund

Can any of the company-specific risk be diversified away by investing in both Mid Cap and Value Fund 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 Value Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mid Cap Value and Value Fund I, you can compare the effects of market volatilities on Mid Cap and Value Fund 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 Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Value Fund.

Diversification Opportunities for Mid Cap and Value Fund

0.88

Correlation Coefficient

Mid Cap  Value Fund

Very poor diversification

The 3 months correlation between Mid and Value is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and Value Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund I 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 Value are associated (or correlated) with Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund I has no effect on the direction of Mid Cap i.e., Mid Cap and Value Fund go up and down completely randomly.

Pair Corralation between Mid Cap and Value Fund

Assuming the 90 days horizon Mid Cap Value is expected to under-perform the Value Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Mid Cap Value is 1.07 times less risky than Value Fund. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Value Fund I is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  857.00  in Value Fund I on September 22, 2024 and sell it today you would lose (87.00) from holding Value Fund I or give up 10.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Mid Cap Value  vs.  Value Fund I

Mid Cap Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mid Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Value Fund I

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Value Fund I has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Mid Cap and Value Fund

The main advantage of trading using opposite Mid Cap and Value Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Value Fund 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 Value Fund will offset losses from the drop in Value Fund's long position.

The idea behind Mid Cap Value and Value Fund I pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..