Correlation Between Financials Ultrasector and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Financials Ultrasector and 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 Financials Ultrasector and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financials Ultrasector Profund and Mid Cap Value, you can compare the effects of market volatilities on Financials Ultrasector and 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 Financials Ultrasector with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financials Ultrasector and Mid Cap.
Diversification Opportunities for Financials Ultrasector and Mid Cap
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Financials and Mid is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Financials Ultrasector Profund and Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Value and Financials Ultrasector 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 Financials Ultrasector Profund are associated (or correlated) with 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 Mid Cap Value has no effect on the direction of Financials Ultrasector i.e., Financials Ultrasector and Mid Cap go up and down completely randomly.
Pair Corralation between Financials Ultrasector and Mid Cap
Assuming the 90 days horizon Financials Ultrasector Profund is expected to generate 1.56 times more return on investment than Mid Cap. However, Financials Ultrasector is 1.56 times more volatile than Mid Cap Value. It trades about 0.11 of its potential returns per unit of risk. Mid Cap Value is currently generating about 0.16 per unit of risk. If you would invest 4,395 in Financials Ultrasector Profund on May 30, 2025 and sell it today you would earn a total of 339.00 from holding Financials Ultrasector Profund or generate 7.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.41% |
| Values | Daily Returns |
Financials Ultrasector Profund vs. Mid Cap Value
Performance |
| Timeline |
| Financials Ultrasector |
| Mid Cap Value |
Financials Ultrasector and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financials Ultrasector and Mid Cap
The main advantage of trading using opposite Financials Ultrasector and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financials Ultrasector position performs unexpectedly, 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 Mid Cap will offset losses from the drop in Mid Cap's long position.The idea behind Financials Ultrasector Profund and 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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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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