Correlation Between Target Retirement and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Target Retirement 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 Target Retirement and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target Retirement 2040 and Mid Cap Growth, you can compare the effects of market volatilities on Target Retirement 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 Target Retirement with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Retirement and Mid Cap.
Diversification Opportunities for Target Retirement and Mid Cap
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Target and Mid is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Target Retirement 2040 and Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Growth and Target Retirement 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 Target Retirement 2040 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 Growth has no effect on the direction of Target Retirement i.e., Target Retirement and Mid Cap go up and down completely randomly.
Pair Corralation between Target Retirement and Mid Cap
Assuming the 90 days horizon Target Retirement is expected to generate 1.16 times less return on investment than Mid Cap. But when comparing it to its historical volatility, Target Retirement 2040 is 1.92 times less risky than Mid Cap. It trades about 0.2 of its potential returns per unit of risk. Mid Cap Growth is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,334 in Mid Cap Growth on June 3, 2025 and sell it today you would earn a total of 279.00 from holding Mid Cap Growth or generate 6.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target Retirement 2040 vs. Mid Cap Growth
Performance |
| Timeline |
| Target Retirement 2040 |
| Mid Cap Growth |
Target Retirement and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target Retirement and Mid Cap
The main advantage of trading using opposite Target Retirement and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Retirement 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.| Target Retirement vs. Metropolitan West High | Target Retirement vs. Gmo High Yield | Target Retirement vs. Msift High Yield | Target Retirement vs. Ab High Income |
| Mid Cap vs. Touchstone Mid Cap | Mid Cap vs. Federated Mdt Small | Mid Cap vs. Harding Loevner International | Mid Cap vs. Sterling Capital Equity |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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