Correlation Between Midcap Growth and Smallcap
Can any of the company-specific risk be diversified away by investing in both Midcap Growth and Smallcap 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 Midcap Growth and Smallcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Midcap Growth Fund and Smallcap Sp 600, you can compare the effects of market volatilities on Midcap Growth and Smallcap 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 Midcap Growth with a short position of Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Growth and Smallcap.
Diversification Opportunities for Midcap Growth and Smallcap
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Midcap and Smallcap is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Growth Fund and Smallcap Sp 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Sp 600 and Midcap Growth 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 Midcap Growth Fund are associated (or correlated) with Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Sp 600 has no effect on the direction of Midcap Growth i.e., Midcap Growth and Smallcap go up and down completely randomly.
Pair Corralation between Midcap Growth and Smallcap
Assuming the 90 days horizon Midcap Growth Fund is expected to generate 0.9 times more return on investment than Smallcap. However, Midcap Growth Fund is 1.12 times less risky than Smallcap. It trades about 0.26 of its potential returns per unit of risk. Smallcap Sp 600 is currently generating about 0.09 per unit of risk. If you would invest 1,088 in Midcap Growth Fund on May 4, 2025 and sell it today you would earn a total of 191.00 from holding Midcap Growth Fund or generate 17.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Midcap Growth Fund vs. Smallcap Sp 600
Performance |
Timeline |
Midcap Growth |
Smallcap Sp 600 |
Midcap Growth and Smallcap Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Midcap Growth and Smallcap
The main advantage of trading using opposite Midcap Growth and Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midcap Growth position performs unexpectedly, Smallcap 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 Smallcap will offset losses from the drop in Smallcap's long position.Midcap Growth vs. Astor Star Fund | Midcap Growth vs. Semiconductor Ultrasector Profund | Midcap Growth vs. Rational Defensive Growth | Midcap Growth vs. Eic Value Fund |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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