Correlation Between Us Large and Us Small
Can any of the company-specific risk be diversified away by investing in both Us Large and Us Small 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 Us Large and Us Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Large Cap and Us Small Cap, you can compare the effects of market volatilities on Us Large and Us Small 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 Us Large with a short position of Us Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Large and Us Small.
Diversification Opportunities for Us Large and Us Small
Almost no diversification
The 3 months correlation between DFLVX and DFSVX is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Us Large Cap and Us Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Small Cap and Us Large 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 Us Large Cap are associated (or correlated) with Us Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Small Cap has no effect on the direction of Us Large i.e., Us Large and Us Small go up and down completely randomly.
Pair Corralation between Us Large and Us Small
Assuming the 90 days horizon Us Large Cap is expected to generate 0.81 times more return on investment than Us Small. However, Us Large Cap is 1.24 times less risky than Us Small. It trades about 0.33 of its potential returns per unit of risk. Us Small Cap is currently generating about 0.19 per unit of risk. If you would invest 4,919 in Us Large Cap on November 3, 2024 and sell it today you would earn a total of 236.00 from holding Us Large Cap or generate 4.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Large Cap vs. Us Small Cap
Performance |
| Timeline |
| Us Large Cap |
| Us Small Cap |
Us Large and Us Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Large and Us Small
The main advantage of trading using opposite Us Large and Us Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Large position performs unexpectedly, Us Small 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 Us Small will offset losses from the drop in Us Small's long position.| Us Large vs. Dfa International Value | Us Large vs. Dfa International Small | Us Large vs. Us Small Cap | Us Large vs. Dfa Real Estate |
| Us Small vs. Us Micro Cap | Us Small vs. Dfa International Small | Us Small vs. Us Large Cap | Us Small vs. International Small Pany |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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