Correlation Between Large Cap and Equity Income
Can any of the company-specific risk be diversified away by investing in both Large Cap and Equity Income 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 Equity Income 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 Equity Income Fund, you can compare the effects of market volatilities on Large Cap and Equity Income 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 Equity Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Equity Income.
Diversification Opportunities for Large Cap and Equity Income
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Large and Equity is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth and Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Income 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 Equity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Income has no effect on the direction of Large Cap i.e., Large Cap and Equity Income go up and down completely randomly.
Pair Corralation between Large Cap and Equity Income
Assuming the 90 days horizon Large Cap is expected to generate 1.13 times less return on investment than Equity Income. In addition to that, Large Cap is 1.52 times more volatile than Equity Income Fund. It trades about 0.09 of its total potential returns per unit of risk. Equity Income Fund is currently generating about 0.16 per unit of volatility. If you would invest 3,972 in Equity Income Fund on August 29, 2024 and sell it today you would earn a total of 583.00 from holding Equity Income Fund or generate 14.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Large Cap Growth vs. Equity Income Fund
Performance |
| Timeline |
| Large Cap Growth |
| Equity Income |
Large Cap and Equity Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Cap and Equity Income
The main advantage of trading using opposite Large Cap and Equity Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap position performs unexpectedly, Equity Income 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 Equity Income will offset losses from the drop in Equity Income'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 |
| Equity Income vs. Principal Capital Appreciation | Equity Income vs. Diversified International Fund | Equity Income vs. Brown Advisory Growth | Equity Income vs. Midcap Fund Class |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Global Correlations Find global opportunities by holding instruments from different markets |