Correlation Between Ab Value and Mid Cap

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

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

Diversification Opportunities for Ab Value and Mid Cap

0.77

Correlation Coefficient

Ab Value  Mid Cap

Poor diversification

The 3 months correlation between ABVCX and Mid is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ab Value Fund and Mid Cap Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Strategic and Ab Value 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 Ab Value 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 Strategic has no effect on the direction of Ab Value i.e., Ab Value and Mid Cap go up and down completely randomly.

Pair Corralation between Ab Value and Mid Cap

Assuming the 90 days horizon Ab Value is expected to generate 1.13 times less return on investment than Mid Cap. But when comparing it to its historical volatility, Ab Value Fund is 1.29 times less risky than Mid Cap. It trades about 0.16 of its potential returns per unit of risk. Mid Cap Strategic is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,116  in Mid Cap Strategic on May 17, 2025 and sell it today you would earn a total of  151.00  from holding Mid Cap Strategic or generate 7.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Ab Value Fund  vs.  Mid Cap Strategic

Ab Value Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Value Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Ab Value may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Mid Cap Strategic

Risk-Adjusted Performance

Fair

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

Pair Trading with Ab Value and Mid Cap

The main advantage of trading using opposite Ab Value and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Value 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 Ab Value Fund and Mid Cap Strategic 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.