Correlation Between Mid Cap and Vanguard Mid-cap

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Can any of the company-specific risk be diversified away by investing in both Mid Cap and Vanguard Mid-cap 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 Vanguard Mid-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Value and Vanguard Mid Cap Value, you can compare the effects of market volatilities on Mid Cap and Vanguard Mid-cap 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 Vanguard Mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Vanguard Mid-cap.

Diversification Opportunities for Mid Cap and Vanguard Mid-cap

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Mid and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding MID CAP VALUE and VANGUARD MID-CAP VALUE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid-cap Value 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 Value are associated (or correlated) with Vanguard Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid-cap Value has no effect on the direction of Mid Cap i.e., Mid Cap and Vanguard Mid-cap go up and down completely randomly.

Pair Corralation between Mid Cap and Vanguard Mid-cap

Assuming the 90 days horizon Mid Cap is expected to generate 1.27 times less return on investment than Vanguard Mid-cap. But when comparing it to its historical volatility, Mid Cap Value is 1.12 times less risky than Vanguard Mid-cap. It trades about 0.02 of its potential returns per unit of risk. Vanguard Mid Cap Value is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,344  in Vanguard Mid Cap Value on December 30, 2023 and sell it today you would earn a total of  735.00  from holding Vanguard Mid Cap Value or generate 10.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

MID CAP VALUE  vs.  VANGUARD MID-CAP VALUE

 Performance 
       Timeline  
Mid Cap Value 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Value are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mid Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Vanguard Mid-cap Value 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Value are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Mid-cap may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Mid Cap and Vanguard Mid-cap Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mid Cap and Vanguard Mid-cap

The main advantage of trading using opposite Mid Cap and Vanguard Mid-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Vanguard Mid-cap 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 Vanguard Mid-cap will offset losses from the drop in Vanguard Mid-cap's long position.
The idea behind Mid Cap Value and Vanguard Mid Cap Value 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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