Correlation Between Mid Cap and Global Concentrated

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

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

Diversification Opportunities for Mid Cap and Global Concentrated

0.88

Correlation Coefficient

Mid Cap  Global Concentrated

Very poor diversification

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

Pair Corralation between Mid Cap and Global Concentrated

Assuming the 90 days horizon Mid Cap Growth is expected to generate 1.56 times more return on investment than Global Concentrated. However, Mid Cap is 1.56 times more volatile than Global Centrated Portfolio. It trades about 0.22 of its potential returns per unit of risk. Global Centrated Portfolio is currently generating about 0.08 per unit of risk. If you would invest  1,539  in Mid Cap Growth on September 3, 2024 and sell it today you would earn a total of  803.00  from holding Mid Cap Growth or generate 52.18% return on investment over 90 days.

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

Mid Cap Growth  vs.  Global Centrated Portfolio

Mid Cap Growth

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Growth are ranked lower than 30 (%) 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.

Global Centrated Por

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Centrated Portfolio are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Global Concentrated may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mid Cap and Global Concentrated

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

The idea behind Mid Cap Growth and Global Centrated Portfolio 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.