Correlation Between Mid Cap and Value Fund

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

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

Diversification Opportunities for Mid Cap and Value Fund

0.94

Correlation Coefficient

Mid Cap  Value Fund

Almost no diversification

The 3 months correlation between Mid and Value is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and Value Fund R in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund R 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 Value are associated (or correlated) with Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund R has no effect on the direction of Mid Cap i.e., Mid Cap and Value Fund go up and down completely randomly.

Pair Corralation between Mid Cap and Value Fund

Assuming the 90 days horizon Mid Cap Value is expected to generate 1.13 times more return on investment than Value Fund. However, Mid Cap is 1.13 times more volatile than Value Fund R. It trades about 0.16 of its potential returns per unit of risk. Value Fund R is currently generating about 0.17 per unit of risk. If you would invest  1,507  in Mid Cap Value on May 1, 2025 and sell it today you would earn a total of  131.00  from holding Mid Cap Value or generate 8.69% return on investment over 90 days.

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

Mid Cap Value  vs.  Value Fund R

Mid Cap Value

Risk-Adjusted Performance

Good

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

Value Fund R

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund R are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Value Fund may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Mid Cap and Value Fund

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

The idea behind Mid Cap Value and Value Fund R 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.