Correlation Between Mid Cap and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Mid Cap and Emerging Markets 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 Emerging Markets 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 Emerging Markets Fund, you can compare the effects of market volatilities on Mid Cap and Emerging Markets 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 Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Emerging Markets.
Diversification Opportunities for Mid Cap and Emerging Markets
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mid and Emerging is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and Emerging Markets Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets 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 Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of Mid Cap i.e., Mid Cap and Emerging Markets go up and down completely randomly.
Pair Corralation between Mid Cap and Emerging Markets
Assuming the 90 days horizon Mid Cap is expected to generate 3.56 times less return on investment than Emerging Markets. But when comparing it to its historical volatility, Mid Cap Value is 1.28 times less risky than Emerging Markets. It trades about 0.07 of its potential returns per unit of risk. Emerging Markets Fund is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,322 in Emerging Markets Fund on July 20, 2025 and sell it today you would earn a total of 155.00 from holding Emerging Markets Fund or generate 11.72% 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. Emerging Markets Fund
Performance |
| Timeline |
| Mid Cap Value |
| Emerging Markets |
Mid Cap and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Emerging Markets
The main advantage of trading using opposite Mid Cap and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.| Mid Cap vs. T Rowe Price | Mid Cap vs. Hartford Schroders Emerging | Mid Cap vs. T Rowe Price | Mid Cap vs. T Rowe Price |
| Emerging Markets vs. Templeton Developing Markets | Emerging Markets vs. Goldman Sachs Emerging | Emerging Markets vs. Templeton Developing Markets | Emerging Markets vs. Goldman Sachs Mid |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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