Correlation Between Small Company and Mid Cap

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

By analyzing existing cross correlation between Small Pany Growth and Mid Cap 15x Strategy, you can compare the effects of market volatilities on Small Company 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 Small Company with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Company and Mid Cap.

Diversification Opportunities for Small Company and Mid Cap

0.59

Correlation Coefficient

Small Company  Mid Cap

Very weak diversification

The 3 months correlation between Small and Mid is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and Mid Cap 15x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap 15x and Small Company 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 Small Pany Growth 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 15x has no effect on the direction of Small Company i.e., Small Company and Mid Cap go up and down completely randomly.

Pair Corralation between Small Company and Mid Cap

Assuming the 90 days horizon Small Pany Growth is expected to generate 1.16 times more return on investment than Mid Cap. However, Small Company is 1.16 times more volatile than Mid Cap 15x Strategy. It trades about 0.1 of its potential returns per unit of risk. Mid Cap 15x Strategy is currently generating about 0.05 per unit of risk. If you would invest  1,698  in Small Pany Growth on July 29, 2025 and sell it today you would earn a total of  170.00  from holding Small Pany Growth or generate 10.01% return on investment over 90 days.

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

Small Pany Growth  vs.  Mid Cap 15x Strategy

Small Pany Growth

Risk-Adjusted Performance

Fair

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

Mid Cap 15x

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap 15x Strategy are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong 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 Small Company and Mid Cap

The main advantage of trading using opposite Small Company and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Company 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 Small Pany Growth and Mid Cap 15x Strategy 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.