Correlation Between Active International and Mid Cap

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

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

Diversification Opportunities for Active International and Mid Cap

0.67

Correlation Coefficient

Active International  Mid Cap

Poor diversification

The 3 months correlation between Active and Mid is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Active International Allocatio and Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Growth and Active International 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 Active International Allocation 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 Growth has no effect on the direction of Active International i.e., Active International and Mid Cap go up and down completely randomly.

Pair Corralation between Active International and Mid Cap

Assuming the 90 days horizon Active International Allocation is expected to generate 0.49 times more return on investment than Mid Cap. However, Active International Allocation is 2.02 times less risky than Mid Cap. It trades about 0.16 of its potential returns per unit of risk. Mid Cap Growth is currently generating about 0.03 per unit of risk. If you would invest  1,912  in Active International Allocation on July 13, 2025 and sell it today you would earn a total of  137.00  from holding Active International Allocation or generate 7.17% return on investment over 90 days.

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

Active International Allocatio  vs.  Mid Cap Growth

Active International

Risk-Adjusted Performance

Good

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

Mid Cap Growth

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Growth are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Mid Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Active International and Mid Cap

The main advantage of trading using opposite Active International and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Active International 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 Active International Allocation and Mid Cap Growth 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.