Correlation Between Mid Cap and Tributary Small/mid

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

By analyzing existing cross correlation between Mid Cap 15x Strategy and Tributary Smallmid Cap, you can compare the effects of market volatilities on Mid Cap and Tributary Small/mid 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 Tributary Small/mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Tributary Small/mid.

Diversification Opportunities for Mid Cap and Tributary Small/mid

0.98

Correlation Coefficient

Mid Cap  Tributary Small/mid

Almost no diversification

The 3 months correlation between Mid and Tributary is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy and Tributary Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tributary Smallmid Cap 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 15x Strategy are associated (or correlated) with Tributary Small/mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tributary Smallmid Cap has no effect on the direction of Mid Cap i.e., Mid Cap and Tributary Small/mid go up and down completely randomly.

Pair Corralation between Mid Cap and Tributary Small/mid

Assuming the 90 days horizon Mid Cap 15x Strategy is expected to generate 1.33 times more return on investment than Tributary Small/mid. However, Mid Cap is 1.33 times more volatile than Tributary Smallmid Cap. It trades about 0.12 of its potential returns per unit of risk. Tributary Smallmid Cap is currently generating about 0.14 per unit of risk. If you would invest  12,410  in Mid Cap 15x Strategy on May 27, 2025 and sell it today you would earn a total of  1,258  from holding Mid Cap 15x Strategy or generate 10.14% return on investment over 90 days.

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

Mid Cap 15x Strategy  vs.  Tributary Smallmid Cap

Mid Cap 15x

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap 15x Strategy are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Mid Cap may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Tributary Smallmid Cap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tributary Smallmid Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Tributary Small/mid may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Mid Cap and Tributary Small/mid

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

The idea behind Mid Cap 15x Strategy and Tributary Smallmid Cap 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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.