Correlation Between Mid Cap and Intrepid Income

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

By analyzing existing cross correlation between Mid Cap 15x Strategy and Intrepid Income Fund, you can compare the effects of market volatilities on Mid Cap and Intrepid Income 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 Intrepid Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Intrepid Income.

Diversification Opportunities for Mid Cap and Intrepid Income

0.87

Correlation Coefficient

Mid Cap  Intrepid Income

Very poor diversification

The 3 months correlation between Mid and Intrepid is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy and Intrepid Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intrepid Income 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 15x Strategy are associated (or correlated) with Intrepid Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intrepid Income has no effect on the direction of Mid Cap i.e., Mid Cap and Intrepid Income go up and down completely randomly.

Pair Corralation between Mid Cap and Intrepid Income

Assuming the 90 days horizon Mid Cap 15x Strategy is expected to generate 11.14 times more return on investment than Intrepid Income. However, Mid Cap is 11.14 times more volatile than Intrepid Income Fund. It trades about 0.15 of its potential returns per unit of risk. Intrepid Income Fund is currently generating about 0.27 per unit of risk. If you would invest  12,807  in Mid Cap 15x Strategy on September 13, 2024 and sell it today you would earn a total of  1,699  from holding Mid Cap 15x Strategy or generate 13.27% return on investment over 90 days.

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

Mid Cap 15x Strategy  vs.  Intrepid Income Fund

Mid Cap 15x

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap 15x Strategy are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Mid Cap showed solid returns over the last few months and may actually be approaching a breakup point.

Intrepid Income

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Intrepid Income Fund are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Intrepid Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mid Cap and Intrepid Income

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

The idea behind Mid Cap 15x Strategy and Intrepid Income Fund 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.