Correlation Between Midcap Fund and The Midcap

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

By analyzing existing cross correlation between Midcap Fund Class and The Midcap Growth, you can compare the effects of market volatilities on Midcap Fund and The 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 Midcap Fund with a short position of The Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Fund and The Midcap.

Diversification Opportunities for Midcap Fund and The Midcap

0.99

Correlation Coefficient

Midcap Fund  The Midcap

No risk reduction

The 3 months correlation between Midcap and The is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Fund Class and The Midcap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Growth and Midcap Fund 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 Midcap Fund Class are associated (or correlated) with The Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Growth has no effect on the direction of Midcap Fund i.e., Midcap Fund and The Midcap go up and down completely randomly.

Pair Corralation between Midcap Fund and The Midcap

Assuming the 90 days horizon Midcap Fund Class is expected to generate 0.99 times more return on investment than The Midcap. However, Midcap Fund Class is 1.01 times less risky than The Midcap. It trades about 0.23 of its potential returns per unit of risk. The Midcap Growth is currently generating about 0.22 per unit of risk. If you would invest  4,208  in Midcap Fund Class on September 2, 2024 and sell it today you would earn a total of  533.00  from holding Midcap Fund Class or generate 12.67% return on investment over 90 days.

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

Midcap Fund Class  vs.  The Midcap Growth

Midcap Fund Class

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Midcap Fund Class are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Midcap Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Midcap Growth

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Midcap Growth are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, The Midcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Midcap Fund and The Midcap

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

The idea behind Midcap Fund Class and The Midcap Growth 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.