Correlation Between Mid Cap and Active Bond
Can any of the company-specific risk be diversified away by investing in both Mid Cap and Active Bond 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 Active Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Growth and Active Bond Fund, you can compare the effects of market volatilities on Mid Cap and Active Bond 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 Active Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Active Bond.
Diversification Opportunities for Mid Cap and Active Bond
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Mid and Active is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and Active Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Active Bond Fund 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 Growth are associated (or correlated) with Active Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Active Bond Fund has no effect on the direction of Mid Cap i.e., Mid Cap and Active Bond go up and down completely randomly.
Pair Corralation between Mid Cap and Active Bond
Assuming the 90 days horizon Mid Cap Growth is expected to generate 3.84 times more return on investment than Active Bond. However, Mid Cap is 3.84 times more volatile than Active Bond Fund. It trades about 0.3 of its potential returns per unit of risk. Active Bond Fund is currently generating about 0.12 per unit of risk. If you would invest 3,736 in Mid Cap Growth on April 23, 2025 and sell it today you would earn a total of 822.00 from holding Mid Cap Growth or generate 22.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Growth vs. Active Bond Fund
Performance |
| Timeline |
| Mid Cap Growth |
| Active Bond Fund |
Mid Cap and Active Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Active Bond
The main advantage of trading using opposite Mid Cap and Active Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Active Bond 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 Active Bond will offset losses from the drop in Active Bond's long position.| Mid Cap vs. Touchstone Mid Cap | Mid Cap vs. Federated Mdt Small | Mid Cap vs. Harding Loevner International | Mid Cap vs. Sterling Capital Equity |
| Active Bond vs. Elfun Government Money | Active Bond vs. Voya Government Money | Active Bond vs. Federated Government Income | Active Bond vs. Dunham Porategovernment Bond |
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 Correlations module to find global opportunities by holding instruments from different markets.
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