Correlation Between Large Cap and Secured Options
Can any of the company-specific risk be diversified away by investing in both Large Cap and Secured Options 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 Secured Options into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Large Cap E and Secured Options Portfolio, you can compare the effects of market volatilities on Large Cap and Secured Options 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 Secured Options. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Secured Options.
Diversification Opportunities for Large Cap and Secured Options
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Large and Secured is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap E and Secured Options Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Secured Options Portfolio 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 E are associated (or correlated) with Secured Options. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Secured Options Portfolio has no effect on the direction of Large Cap i.e., Large Cap and Secured Options go up and down completely randomly.
Pair Corralation between Large Cap and Secured Options
Assuming the 90 days horizon Large Cap E is expected to generate 2.08 times more return on investment than Secured Options. However, Large Cap is 2.08 times more volatile than Secured Options Portfolio. It trades about 0.07 of its potential returns per unit of risk. Secured Options Portfolio is currently generating about 0.13 per unit of risk. If you would invest 1,988 in Large Cap E on September 3, 2024 and sell it today you would earn a total of 651.00 from holding Large Cap E or generate 32.75% 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 E vs. Secured Options Portfolio
Performance |
| Timeline |
| Large Cap E |
| Secured Options Portfolio |
Large Cap and Secured Options Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Cap and Secured Options
The main advantage of trading using opposite Large Cap and Secured Options positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap position performs unexpectedly, Secured Options 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 Secured Options will offset losses from the drop in Secured Options' long position.| Large Cap vs. Commonwealth Global Fund | Large Cap vs. Artisan Thematic Fund | Large Cap vs. Eic Value Fund | Large Cap vs. Nasdaq 100 Fund Class |
| Secured Options vs. Jpmorgan Equity Income | Secured Options vs. Jpmorgan Hedged Equity | Secured Options vs. Calamos Market Neutral | Secured Options vs. Jpmorgan Emerging Markets |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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