Correlation Between Mid Cap and Real Estate

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

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

Diversification Opportunities for Mid Cap and Real Estate

0.64

Correlation Coefficient

Mid Cap  Real Estate

Poor diversification

The 3 months correlation between Mid and Real is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth Profund and Real Estate Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Ultrasector 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 Growth Profund are associated (or correlated) with Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Ultrasector has no effect on the direction of Mid Cap i.e., Mid Cap and Real Estate go up and down completely randomly.

Pair Corralation between Mid Cap and Real Estate

Assuming the 90 days horizon Mid Cap Growth Profund is expected to generate 0.79 times more return on investment than Real Estate. However, Mid Cap Growth Profund is 1.27 times less risky than Real Estate. It trades about 0.23 of its potential returns per unit of risk. Real Estate Ultrasector is currently generating about 0.1 per unit of risk. If you would invest  9,568  in Mid Cap Growth Profund on April 28, 2025 and sell it today you would earn a total of  1,379  from holding Mid Cap Growth Profund or generate 14.41% return on investment over 90 days.

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

Mid Cap Growth Profund  vs.  Real Estate Ultrasector

Mid Cap Growth

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Growth Profund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Mid Cap showed solid returns over the last few months and may actually be approaching a breakup point.

Real Estate Ultrasector

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Real Estate Ultrasector are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Real Estate may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Mid Cap and Real Estate

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

The idea behind Mid Cap Growth Profund and Real Estate Ultrasector 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.