Correlation Between Sentinel Mon and Mid Cap

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

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

Diversification Opportunities for Sentinel Mon and Mid Cap

0.93

Correlation Coefficient

Sentinel Mon  Mid Cap

Almost no diversification

The 3 months correlation between Sentinel and Mid is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel Mon Stock and Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Growth and Sentinel Mon 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 Sentinel Mon Stock 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 Growth has no effect on the direction of Sentinel Mon i.e., Sentinel Mon and Mid Cap go up and down completely randomly.

Pair Corralation between Sentinel Mon and Mid Cap

Assuming the 90 days horizon Sentinel Mon is expected to generate 1.51 times less return on investment than Mid Cap. But when comparing it to its historical volatility, Sentinel Mon Stock is 1.72 times less risky than Mid Cap. It trades about 0.11 of its potential returns per unit of risk. Mid Cap Growth is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,546  in Mid Cap Growth on September 25, 2024 and sell it today you would earn a total of  253.00  from holding Mid Cap Growth or generate 7.13% return on investment over 90 days.

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

Sentinel Mon Stock  vs.  Mid Cap Growth

Sentinel Mon Stock

Risk-Adjusted Performance

8 of 100

OK

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

Mid Cap Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Growth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Mid Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sentinel Mon and Mid Cap

The main advantage of trading using opposite Sentinel Mon and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sentinel Mon 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 Sentinel Mon Stock and Mid Cap 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.