Correlation Between Large Company and Global Growth
Can any of the company-specific risk be diversified away by investing in both Large Company and Global Growth 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 Large Company and Global Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Large Pany Value and Global Growth Fund, you can compare the effects of market volatilities on Large Company and Global Growth 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 Large Company with a short position of Global Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Company and Global Growth.
Diversification Opportunities for Large Company and Global Growth
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Large and Global is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Large Pany Value and Global Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Growth and Large Company 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 Large Pany Value are associated (or correlated) with Global Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Growth has no effect on the direction of Large Company i.e., Large Company and Global Growth go up and down completely randomly.
Pair Corralation between Large Company and Global Growth
Assuming the 90 days horizon Large Company is expected to generate 1.09 times less return on investment than Global Growth. But when comparing it to its historical volatility, Large Pany Value is 1.53 times less risky than Global Growth. It trades about 0.05 of its potential returns per unit of risk. Global Growth Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,066 in Global Growth Fund on August 27, 2024 and sell it today you would earn a total of 180.00 from holding Global Growth Fund or generate 16.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Large Pany Value vs. Global Growth Fund
Performance |
| Timeline |
| Large Pany Value |
| Global Growth |
Large Company and Global Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Company and Global Growth
The main advantage of trading using opposite Large Company and Global Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Company position performs unexpectedly, Global Growth 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 Global Growth will offset losses from the drop in Global Growth's long position.| Large Company vs. International Growth Fund | Large Company vs. Growth Fund Investor | Large Company vs. Ultra Fund Investor | Large Company vs. Strategic Allocation Aggressive |
| Global Growth vs. Emerging Markets Fund | Global Growth vs. International Growth Fund | Global Growth vs. Heritage Fund Investor | Global Growth vs. Select Fund Investor |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Stocks Directory Find actively traded stocks across global markets | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |