Correlation Between Small-cap Value and Principal Midcap
Can any of the company-specific risk be diversified away by investing in both Small-cap Value and Principal Midcap 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 Small-cap Value and Principal Midcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value Series and Principal Midcap Value, you can compare the effects of market volatilities on Small-cap Value and Principal Midcap 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 Small-cap Value with a short position of Principal Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Principal Midcap.
Diversification Opportunities for Small-cap Value and Principal Midcap
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small-cap and Principal is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Series and Principal Midcap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Midcap Value and Small-cap Value 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 Small Cap Value Series are associated (or correlated) with Principal Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Midcap Value has no effect on the direction of Small-cap Value i.e., Small-cap Value and Principal Midcap go up and down completely randomly.
Pair Corralation between Small-cap Value and Principal Midcap
Assuming the 90 days horizon Small Cap Value Series is expected to under-perform the Principal Midcap. In addition to that, Small-cap Value is 1.75 times more volatile than Principal Midcap Value. It trades about -0.07 of its total potential returns per unit of risk. Principal Midcap Value is currently generating about -0.04 per unit of volatility. If you would invest 1,629 in Principal Midcap Value on May 24, 2025 and sell it today you would lose (10.00) from holding Principal Midcap Value or give up 0.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Series vs. Principal Midcap Value
Performance |
| Timeline |
| Small Cap Value |
| Principal Midcap Value |
Small-cap Value and Principal Midcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Value and Principal Midcap
The main advantage of trading using opposite Small-cap Value and Principal Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value position performs unexpectedly, Principal Midcap 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 Principal Midcap will offset losses from the drop in Principal Midcap's long position.| Small-cap Value vs. Absolute Convertible Arbitrage | Small-cap Value vs. Putnam Convertible Securities | Small-cap Value vs. Lord Abbett Convertible | Small-cap Value vs. Allianzgi Convertible Income |
| Principal Midcap vs. Advent Claymore Convertible | Principal Midcap vs. Absolute Convertible Arbitrage | Principal Midcap vs. Fidelity Sai Convertible | Principal Midcap vs. Virtus Convertible |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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