Correlation Between Fabwx and Large Cap
Can any of the company-specific risk be diversified away by investing in both Fabwx and Large 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 Fabwx and Large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fabwx and Large Cap Value, you can compare the effects of market volatilities on Fabwx and Large 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 Fabwx with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fabwx and Large Cap.
Diversification Opportunities for Fabwx and Large Cap
Modest diversification
The 3 months correlation between Fabwx and Large is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Fabwx and Large Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Value and Fabwx 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 Fabwx are associated (or correlated) with Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Value has no effect on the direction of Fabwx i.e., Fabwx and Large Cap go up and down completely randomly.
Pair Corralation between Fabwx and Large Cap
Assuming the 90 days horizon Fabwx is expected to generate 4.38 times less return on investment than Large Cap. In addition to that, Fabwx is 1.77 times more volatile than Large Cap Value. It trades about 0.02 of its total potential returns per unit of risk. Large Cap Value is currently generating about 0.13 per unit of volatility. If you would invest 2,626 in Large Cap Value on November 7, 2024 and sell it today you would earn a total of 56.00 from holding Large Cap Value or generate 2.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
Fabwx vs. Large Cap Value
Performance |
| Timeline |
| Fabwx |
| Large Cap Value |
Fabwx and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fabwx and Large Cap
The main advantage of trading using opposite Fabwx and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fabwx position performs unexpectedly, Large 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 Large Cap will offset losses from the drop in Large Cap's long position.| Fabwx vs. Schwab Government Money | Fabwx vs. Financials Ultrasector Profund | Fabwx vs. Davis Financial Fund | Fabwx vs. Hewitt Money Market |
| Large Cap vs. Baillie Gifford Health | Large Cap vs. Hartford Healthcare Hls | Large Cap vs. Highland Longshort Healthcare | Large Cap vs. Eaton Vance Worldwide |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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