Correlation Between Advent Claymore and Mid Cap

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

By analyzing existing cross correlation between Advent Claymore Convertible and Mid Cap Strategic, you can compare the effects of market volatilities on Advent Claymore 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 Advent Claymore with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advent Claymore and Mid Cap.

Diversification Opportunities for Advent Claymore and Mid Cap

0.64

Correlation Coefficient

Advent Claymore  Mid Cap

Poor diversification

The 3 months correlation between Advent and Mid is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Advent Claymore Convertible and Mid Cap Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Strategic and Advent Claymore 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 Advent Claymore Convertible 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 Strategic has no effect on the direction of Advent Claymore i.e., Advent Claymore and Mid Cap go up and down completely randomly.

Pair Corralation between Advent Claymore and Mid Cap

Considering the 90-day investment horizon Advent Claymore Convertible is expected to generate 0.95 times more return on investment than Mid Cap. However, Advent Claymore Convertible is 1.05 times less risky than Mid Cap. It trades about 0.15 of its potential returns per unit of risk. Mid Cap Strategic is currently generating about 0.13 per unit of risk. If you would invest  888.00  in Advent Claymore Convertible on September 4, 2024 and sell it today you would earn a total of  342.00  from holding Advent Claymore Convertible or generate 38.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Advent Claymore Convertible  vs.  Mid Cap Strategic

Advent Claymore Conv

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advent Claymore Convertible are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. Despite quite persistent basic indicators, Advent Claymore is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Mid Cap Strategic

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Strategic are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Mid Cap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advent Claymore and Mid Cap

The main advantage of trading using opposite Advent Claymore and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advent Claymore 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.

The idea behind Advent Claymore Convertible and Mid Cap Strategic 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.