Correlation Between Large Cap and Quantitative
Can any of the company-specific risk be diversified away by investing in both Large Cap and Quantitative 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 Cap and Quantitative into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Large Cap Growth and Quantitative U S, you can compare the effects of market volatilities on Large Cap and Quantitative 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 Cap with a short position of Quantitative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Quantitative.
Diversification Opportunities for Large Cap and Quantitative
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Large and Quantitative is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth and Quantitative U S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantitative U S and Large Cap 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 Cap Growth are associated (or correlated) with Quantitative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantitative U S has no effect on the direction of Large Cap i.e., Large Cap and Quantitative go up and down completely randomly.
Pair Corralation between Large Cap and Quantitative
Assuming the 90 days horizon Large Cap is expected to generate 1.24 times less return on investment than Quantitative. But when comparing it to its historical volatility, Large Cap Growth is 1.22 times less risky than Quantitative. It trades about 0.06 of its potential returns per unit of risk. Quantitative U S is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,189 in Quantitative U S on August 30, 2024 and sell it today you would earn a total of 488.00 from holding Quantitative U S or generate 41.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Large Cap Growth vs. Quantitative U S
Performance |
| Timeline |
| Large Cap Growth |
| Quantitative U S |
Large Cap and Quantitative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Cap and Quantitative
The main advantage of trading using opposite Large Cap and Quantitative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap position performs unexpectedly, Quantitative 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 Quantitative will offset losses from the drop in Quantitative's long position.| Large Cap vs. Large Cap E | Large Cap vs. International Fund International | Large Cap vs. Parnassus Endeavor Fund | Large Cap vs. Parnassus E Equity |
| Quantitative vs. Dunham Large Cap | Quantitative vs. Aqr Large Cap | Quantitative vs. Fidelity Series 1000 | Quantitative vs. Qs Large 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |