Correlation Between Real Return and Mid-cap Growth

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

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

Diversification Opportunities for Real Return and Mid-cap Growth

0.87

Correlation Coefficient

Real Return  Mid-cap Growth

Very poor diversification

The 3 months correlation between Real and Mid-cap is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Real Return Fund and Mid Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Growth and Real Return 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 Real Return Fund are associated (or correlated) with Mid-cap Growth. 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 Real Return i.e., Real Return and Mid-cap Growth go up and down completely randomly.

Pair Corralation between Real Return and Mid-cap Growth

Assuming the 90 days horizon Real Return is expected to generate 2.32 times less return on investment than Mid-cap Growth. But when comparing it to its historical volatility, Real Return Fund is 3.95 times less risky than Mid-cap Growth. It trades about 0.14 of its potential returns per unit of risk. Mid Cap Growth Profund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  10,609  in Mid Cap Growth Profund on July 1, 2025 and sell it today you would earn a total of  490.00  from holding Mid Cap Growth Profund or generate 4.62% return on investment over 90 days.

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

Real Return Fund  vs.  Mid Cap Growth Profund

Real Return Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Real Return Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Real Return is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mid Cap Growth

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Growth Profund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Mid-cap Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Real Return and Mid-cap Growth

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

The idea behind Real Return Fund and Mid Cap Growth Profund 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.