Correlation Between International Government and Mid Cap
Can any of the company-specific risk be diversified away by investing in both International Government 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 International Government and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Government Bond and Mid Cap Index, you can compare the effects of market volatilities on International Government 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 International Government with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Government and Mid Cap.
Diversification Opportunities for International Government and Mid Cap
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Mid is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding International Government Bond and Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Index and International Government 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 International Government Bond 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 Index has no effect on the direction of International Government i.e., International Government and Mid Cap go up and down completely randomly.
Pair Corralation between International Government and Mid Cap
Assuming the 90 days horizon International Government is expected to generate 2.87 times less return on investment than Mid Cap. But when comparing it to its historical volatility, International Government Bond is 2.73 times less risky than Mid Cap. It trades about 0.14 of its potential returns per unit of risk. Mid Cap Index is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,376 in Mid Cap Index on June 11, 2025 and sell it today you would earn a total of 197.00 from holding Mid Cap Index or generate 8.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Government Bond vs. Mid Cap Index
Performance |
| Timeline |
| International Government |
| Mid Cap Index |
International Government and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Government and Mid Cap
The main advantage of trading using opposite International Government and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Government 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.| International Government vs. Small Cap Value Fund | International Government vs. Goldman Sachs Small | International Government vs. Fidelity Small Cap | International Government vs. Mid Cap Growth Profund |
| Mid Cap vs. Praxis Small Cap | Mid Cap vs. Sp Smallcap 600 | Mid Cap vs. Foundry Partners Fundamental | Mid Cap vs. Vanguard Strategic Small Cap |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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