Correlation Between Equity Growth and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Equity Growth 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 Equity Growth and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Growth Fund and Mid Cap Value, you can compare the effects of market volatilities on Equity Growth 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 Equity Growth with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and Mid Cap.
Diversification Opportunities for Equity Growth and Mid Cap
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Equity and Mid is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Fund and Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Value and Equity Growth 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 Equity Growth Fund 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 Value has no effect on the direction of Equity Growth i.e., Equity Growth and Mid Cap go up and down completely randomly.
Pair Corralation between Equity Growth and Mid Cap
Assuming the 90 days horizon Equity Growth Fund is expected to generate 1.25 times more return on investment than Mid Cap. However, Equity Growth is 1.25 times more volatile than Mid Cap Value. It trades about -0.04 of its potential returns per unit of risk. Mid Cap Value is currently generating about -0.08 per unit of risk. If you would invest 2,891 in Equity Growth Fund on February 6, 2024 and sell it today you would lose (26.00) from holding Equity Growth Fund or give up 0.9% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Equity Growth Fund vs. Mid Cap Value
Performance |
Timeline |
Equity Growth |
Mid Cap Value |
Equity Growth and Mid Cap Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Equity Growth and Mid Cap
The main advantage of trading using opposite Equity Growth and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth 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.Equity Growth vs. Income Growth Fund | Equity Growth vs. Equity Income Fund | Equity Growth vs. International Growth Fund | Equity Growth vs. Value Fund Investor |
Mid Cap vs. Equity Growth Fund | Mid Cap vs. Income Growth Fund | Mid Cap vs. Diversified Bond Fund | Mid Cap vs. Emerging Markets Fund |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
Insider Screener Find insiders across different sectors to evaluate their impact on performance |