Correlation Between Sp Midcap and Extended Market
Can any of the company-specific risk be diversified away by investing in both Sp Midcap and Extended Market 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 Sp Midcap and Extended Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp Midcap Index and Extended Market Index, you can compare the effects of market volatilities on Sp Midcap and Extended Market 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 Sp Midcap with a short position of Extended Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Midcap and Extended Market.
Diversification Opportunities for Sp Midcap and Extended Market
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between SPMIX and Extended is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Sp Midcap Index and Extended Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extended Market Index and Sp Midcap 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 Sp Midcap Index are associated (or correlated) with Extended Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extended Market Index has no effect on the direction of Sp Midcap i.e., Sp Midcap and Extended Market go up and down completely randomly.
Pair Corralation between Sp Midcap and Extended Market
Assuming the 90 days horizon Sp Midcap is expected to generate 1.16 times less return on investment than Extended Market. But when comparing it to its historical volatility, Sp Midcap Index is 1.17 times less risky than Extended Market. It trades about 0.42 of its potential returns per unit of risk. Extended Market Index is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 1,961 in Extended Market Index on April 14, 2025 and sell it today you would earn a total of 141.00 from holding Extended Market Index or generate 7.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sp Midcap Index vs. Extended Market Index
Performance |
| Timeline |
| Sp Midcap Index |
| Extended Market Index |
Sp Midcap and Extended Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp Midcap and Extended Market
The main advantage of trading using opposite Sp Midcap and Extended Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp Midcap position performs unexpectedly, Extended Market 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 Extended Market will offset losses from the drop in Extended Market's long position.| Sp Midcap vs. Gmo Global Equity | Sp Midcap vs. Aqr Long Short Equity | Sp Midcap vs. Pnc International Equity | Sp Midcap vs. Qs International Equity |
| Extended Market vs. Growth Opportunities Fund | Extended Market vs. Federated Emerging Market | Extended Market vs. The Tocqueville Fund | Extended Market vs. T Rowe Price |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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