Correlation Between Sp Midcap and Applied Finance

Can any of the company-specific risk be diversified away by investing in both Sp Midcap and Applied Finance 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 Sp Midcap and Applied Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sp Midcap 400 and Applied Finance Core, you can compare the effects of market volatilities on Sp Midcap and Applied Finance 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 Sp Midcap with a short position of Applied Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Midcap and Applied Finance.

Diversification Opportunities for Sp Midcap and Applied Finance

0.47

Correlation Coefficient

Sp Midcap  Applied Finance

Very weak diversification

The 3 months correlation between RYBHX and Applied is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sp Midcap 400 and Applied Finance Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Finance Core and Sp Midcap 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 Sp Midcap 400 are associated (or correlated) with Applied Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Finance Core has no effect on the direction of Sp Midcap i.e., Sp Midcap and Applied Finance go up and down completely randomly.

Pair Corralation between Sp Midcap and Applied Finance

Assuming the 90 days horizon Sp Midcap 400 is expected to generate 1.5 times more return on investment than Applied Finance. However, Sp Midcap is 1.5 times more volatile than Applied Finance Core. It trades about 0.08 of its potential returns per unit of risk. Applied Finance Core is currently generating about 0.05 per unit of risk. If you would invest  5,098  in Sp Midcap 400 on September 2, 2025 and sell it today you would earn a total of  244.00  from holding Sp Midcap 400 or generate 4.79% return on investment over 90 days.

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

Sp Midcap 400  vs.  Applied Finance Core

Sp Midcap 400

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Sp Midcap 400 are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Sp Midcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Applied Finance Core

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Finance Core are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Applied Finance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sp Midcap and Applied Finance

The main advantage of trading using opposite Sp Midcap and Applied Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp Midcap position performs unexpectedly, Applied Finance 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 Applied Finance will offset losses from the drop in Applied Finance's long position.

The idea behind Sp Midcap 400 and Applied Finance Core 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.