Correlation Between Nicholas Equity and Sp Midcap

Can any of the company-specific risk be diversified away by investing in both Nicholas Equity and Sp Midcap 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 Nicholas Equity and Sp Midcap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nicholas Equity Income and Sp Midcap Index, you can compare the effects of market volatilities on Nicholas Equity and Sp Midcap 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 Nicholas Equity with a short position of Sp Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nicholas Equity and Sp Midcap.

Diversification Opportunities for Nicholas Equity and Sp Midcap

0.7

Correlation Coefficient

Nicholas Equity  Sp Midcap

Poor diversification

The 3 months correlation between Nicholas and SPMIX is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Nicholas Equity Income and Sp Midcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Midcap Index and Nicholas Equity 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 Nicholas Equity Income are associated (or correlated) with Sp Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Midcap Index has no effect on the direction of Nicholas Equity i.e., Nicholas Equity and Sp Midcap go up and down completely randomly.

Pair Corralation between Nicholas Equity and Sp Midcap

Assuming the 90 days horizon Nicholas Equity Income is expected to generate 0.37 times more return on investment than Sp Midcap. However, Nicholas Equity Income is 2.73 times less risky than Sp Midcap. It trades about 0.11 of its potential returns per unit of risk. Sp Midcap Index is currently generating about 0.04 per unit of risk. If you would invest  2,218  in Nicholas Equity Income on September 4, 2024 and sell it today you would earn a total of  79.00  from holding Nicholas Equity Income or generate 3.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Nicholas Equity Income  vs.  Sp Midcap Index

Nicholas Equity Income

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nicholas Equity Income are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Nicholas Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sp Midcap Index

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sp Midcap Index are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Sp Midcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nicholas Equity and Sp Midcap

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

The idea behind Nicholas Equity Income and Sp Midcap Index 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.