Correlation Between Mid Cap and One Choice

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Can any of the company-specific risk be diversified away by investing in both Mid Cap and One Choice 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 One Choice 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 One Choice In, you can compare the effects of market volatilities on Mid Cap and One Choice 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 One Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and One Choice.

Diversification Opportunities for Mid Cap and One Choice

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Mid and One is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding MID CAP VALUE and ONE CHOICE IN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Choice In 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 One Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Choice In has no effect on the direction of Mid Cap i.e., Mid Cap and One Choice go up and down completely randomly.

Pair Corralation between Mid Cap and One Choice

Assuming the 90 days horizon Mid Cap is expected to generate 1.27 times less return on investment than One Choice. In addition to that, Mid Cap is 1.79 times more volatile than One Choice In. It trades about 0.05 of its total potential returns per unit of risk. One Choice In is currently generating about 0.11 per unit of volatility. If you would invest  1,207  in One Choice In on December 3, 2023 and sell it today you would earn a total of  12.00  from holding One Choice In or generate 0.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.45%
ValuesDaily Returns

MID CAP VALUE  vs.  ONE CHOICE IN

 Performance 
       Timeline  
Mid Cap Value 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Mid Cap Value has generated negative risk-adjusted returns adding no value to fund investors. 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.
One Choice In 

Risk-Adjusted Performance

4 of 100

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

Mid Cap and One Choice Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mid Cap and One Choice

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

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