Correlation Between Mid Cap and Multi-manager Growth

Can any of the company-specific risk be diversified away by investing in both Mid Cap and Multi-manager Growth 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 Multi-manager Growth 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 Multi Manager Growth Strategies, you can compare the effects of market volatilities on Mid Cap and Multi-manager Growth 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 Multi-manager Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Multi-manager Growth.

Diversification Opportunities for Mid Cap and Multi-manager Growth

0.89

Correlation Coefficient

Mid Cap  Multi-manager Growth

Very poor diversification

The 3 months correlation between Mid and Multi-manager is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and Multi Manager Growth Strategie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager Growth 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 Multi-manager Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager Growth has no effect on the direction of Mid Cap i.e., Mid Cap and Multi-manager Growth go up and down completely randomly.

Pair Corralation between Mid Cap and Multi-manager Growth

Assuming the 90 days horizon Mid Cap is expected to generate 2.34 times less return on investment than Multi-manager Growth. But when comparing it to its historical volatility, Mid Cap Value is 1.01 times less risky than Multi-manager Growth. It trades about 0.09 of its potential returns per unit of risk. Multi Manager Growth Strategies is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,822  in Multi Manager Growth Strategies on May 15, 2025 and sell it today you would earn a total of  207.00  from holding Multi Manager Growth Strategies or generate 11.36% return on investment over 90 days.

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

Mid Cap Value  vs.  Multi Manager Growth Strategie

Mid Cap Value

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Value are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mid Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Multi Manager Growth

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Manager Growth Strategies are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Multi-manager Growth may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Mid Cap and Multi-manager Growth

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

The idea behind Mid Cap Value and Multi Manager Growth Strategies 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.