Correlation Between Mid Cap and United Parcel
Can any of the company-specific risk be diversified away by investing in both Mid Cap and United Parcel 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 United Parcel 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 United Parcel Service, you can compare the effects of market volatilities on Mid Cap and United Parcel 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 United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and United Parcel.
Diversification Opportunities for Mid Cap and United Parcel
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mid and United is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Mid Cap i.e., Mid Cap and United Parcel go up and down completely randomly.
Pair Corralation between Mid Cap and United Parcel
Assuming the 90 days horizon Mid Cap Value is expected to generate 0.35 times more return on investment than United Parcel. However, Mid Cap Value is 2.85 times less risky than United Parcel. It trades about 0.06 of its potential returns per unit of risk. United Parcel Service is currently generating about -0.04 per unit of risk. If you would invest 1,546 in Mid Cap Value on January 25, 2024 and sell it today you would earn a total of 39.00 from holding Mid Cap Value or generate 2.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Mid Cap Value vs. United Parcel Service
Performance |
Timeline |
Mid Cap Value |
United Parcel Service |
Mid Cap and United Parcel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Mid Cap and United Parcel
The main advantage of trading using opposite Mid Cap and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, United Parcel 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 United Parcel will offset losses from the drop in United Parcel's long position.Mid Cap vs. Janus Triton Fund | Mid Cap vs. New World Fund | Mid Cap vs. Fidelity Mid Cap | Mid Cap vs. Mfs 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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