Correlation Between Midcap Growth and Smallcap Value
Can any of the company-specific risk be diversified away by investing in both Midcap Growth and Smallcap Value 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 Midcap Growth and Smallcap Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Midcap Growth Fund and Smallcap Value Fund, you can compare the effects of market volatilities on Midcap Growth and Smallcap Value 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 Midcap Growth with a short position of Smallcap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Growth and Smallcap Value.
Diversification Opportunities for Midcap Growth and Smallcap Value
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Midcap and Smallcap is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Growth Fund and Smallcap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Value and Midcap Growth 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 Midcap Growth Fund are associated (or correlated) with Smallcap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Value has no effect on the direction of Midcap Growth i.e., Midcap Growth and Smallcap Value go up and down completely randomly.
Pair Corralation between Midcap Growth and Smallcap Value
Assuming the 90 days horizon Midcap Growth is expected to generate 1.33 times less return on investment than Smallcap Value. But when comparing it to its historical volatility, Midcap Growth Fund is 1.18 times less risky than Smallcap Value. It trades about 0.15 of its potential returns per unit of risk. Smallcap Value Fund is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,026 in Smallcap Value Fund on June 6, 2025 and sell it today you would earn a total of 130.00 from holding Smallcap Value Fund or generate 12.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Midcap Growth Fund vs. Smallcap Value Fund
Performance |
| Timeline |
| Midcap Growth |
| Smallcap Value |
Midcap Growth and Smallcap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Midcap Growth and Smallcap Value
The main advantage of trading using opposite Midcap Growth and Smallcap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midcap Growth position performs unexpectedly, Smallcap Value 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 Smallcap Value will offset losses from the drop in Smallcap Value's long position.| Midcap Growth vs. John Hancock Municipal | Midcap Growth vs. Ab Municipal Bond | Midcap Growth vs. California Municipal Portfolio | Midcap Growth vs. Vanguard Intermediate Term Tax Exempt |
| Smallcap Value vs. Strategic Asset Management | Smallcap Value vs. Strategic Asset Management | Smallcap Value vs. Strategic Asset Management | Smallcap Value vs. Strategic Asset Management |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |