Correlation Between Short Precious and Mid Cap

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

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

Diversification Opportunities for Short Precious and Mid Cap

0.55

Correlation Coefficient

Short Precious  Mid Cap

Very weak diversification

The 3 months correlation between Short and Mid is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Short Precious Metals and Mid Cap Profund Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Profund and Short Precious 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 Short Precious Metals 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 Profund has no effect on the direction of Short Precious i.e., Short Precious and Mid Cap go up and down completely randomly.

Pair Corralation between Short Precious and Mid Cap

Assuming the 90 days horizon Short Precious is expected to generate 1.2 times less return on investment than Mid Cap. In addition to that, Short Precious is 2.01 times more volatile than Mid Cap Profund Mid Cap. It trades about 0.06 of its total potential returns per unit of risk. Mid Cap Profund Mid Cap is currently generating about 0.14 per unit of volatility. If you would invest  12,304  in Mid Cap Profund Mid Cap on September 14, 2024 and sell it today you would earn a total of  1,016  from holding Mid Cap Profund Mid Cap or generate 8.26% return on investment over 90 days.

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

Short Precious Metals  vs.  Mid Cap Profund Mid Cap

Short Precious Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Short Precious Metals are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Short Precious may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mid Cap Profund

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Profund Mid Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Mid Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Short Precious and Mid Cap

The main advantage of trading using opposite Short Precious and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Precious 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 Short Precious Metals and Mid Cap Profund Mid Cap 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.