Correlation Between Mid Capitalization and Global Real

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

By analyzing existing cross correlation between Mid Capitalization Portfolio and Global Real Estate, you can compare the effects of market volatilities on Mid Capitalization and Global Real 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 Capitalization with a short position of Global Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Capitalization and Global Real.

Diversification Opportunities for Mid Capitalization and Global Real

0.45

Correlation Coefficient

Mid Capitalization  Global Real

Very weak diversification

The 3 months correlation between Mid and Global is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Mid Capitalization Portfolio and Global Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Real Estate and Mid Capitalization 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 Capitalization Portfolio are associated (or correlated) with Global Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Real Estate has no effect on the direction of Mid Capitalization i.e., Mid Capitalization and Global Real go up and down completely randomly.

Pair Corralation between Mid Capitalization and Global Real

Assuming the 90 days horizon Mid Capitalization Portfolio is expected to generate 1.33 times more return on investment than Global Real. However, Mid Capitalization is 1.33 times more volatile than Global Real Estate. It trades about 0.14 of its potential returns per unit of risk. Global Real Estate is currently generating about 0.02 per unit of risk. If you would invest  1,365  in Mid Capitalization Portfolio on May 17, 2025 and sell it today you would earn a total of  110.00  from holding Mid Capitalization Portfolio or generate 8.06% return on investment over 90 days.

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

Mid Capitalization Portfolio  vs.  Global Real Estate

Mid Capitalization

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Capitalization Portfolio are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mid Capitalization may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Global Real Estate

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Real Estate are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Global Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mid Capitalization and Global Real

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

The idea behind Mid Capitalization Portfolio and Global Real Estate 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.