Correlation Between Large Cap and Core Fixed
Can any of the company-specific risk be diversified away by investing in both Large Cap and Core Fixed 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 Core Fixed 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 Core Fixed Income, you can compare the effects of market volatilities on Large Cap and Core Fixed 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 Core Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Core Fixed.
Diversification Opportunities for Large Cap and Core Fixed
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Large and Core is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap E and Core Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Fixed 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 E are associated (or correlated) with Core Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Fixed Income has no effect on the direction of Large Cap i.e., Large Cap and Core Fixed go up and down completely randomly.
Pair Corralation between Large Cap and Core Fixed
Assuming the 90 days horizon Large Cap E is expected to generate 3.51 times more return on investment than Core Fixed. However, Large Cap is 3.51 times more volatile than Core Fixed Income. It trades about 0.13 of its potential returns per unit of risk. Core Fixed Income is currently generating about 0.12 per unit of risk. If you would invest 2,304 in Large Cap E on August 26, 2024 and sell it today you would earn a total of 321.00 from holding Large Cap E or generate 13.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 63.78% |
| Values | Daily Returns |
Large Cap E vs. Core Fixed Income
Performance |
| Timeline |
| Large Cap E |
| Core Fixed Income |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Large Cap and Core Fixed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Cap and Core Fixed
The main advantage of trading using opposite Large Cap and Core Fixed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap position performs unexpectedly, Core Fixed 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 Core Fixed will offset losses from the drop in Core Fixed's long position.| Large Cap vs. Touchstone Ultra Short | Large Cap vs. Angel Oak Ultrashort | Large Cap vs. Siit Ultra Short | Large Cap vs. Calvert Short Duration |
| Core Fixed vs. International Portfolio International | Core Fixed vs. Strategic Equity Portfolio | Core Fixed vs. Large Cap E | Core Fixed vs. Small Cap Equity |
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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