Correlation Between Large Cap and Large Cap

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Large Cap 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 Large Cap and Large Cap 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 Large Cap Growth, you can compare the effects of market volatilities on Large Cap 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 Large Cap with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Large Cap.

Diversification Opportunities for Large Cap and Large Cap

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Large and Large is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap E and Large Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Growth 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 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 Growth has no effect on the direction of Large Cap i.e., Large Cap and Large Cap go up and down completely randomly.

Pair Corralation between Large Cap and Large Cap

Assuming the 90 days horizon Large Cap is expected to generate 1.26 times less return on investment than Large Cap. But when comparing it to its historical volatility, Large Cap E is 1.35 times less risky than Large Cap. It trades about 0.17 of its potential returns per unit of risk. Large Cap Growth is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,740  in Large Cap Growth on October 24, 2024 and sell it today you would earn a total of  80.00  from holding Large Cap Growth or generate 2.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Large Cap E  vs.  Large Cap Growth

 Performance 
       Timeline  
Large Cap E 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Large Cap E has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.
Large Cap Growth 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Large Cap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Large Cap and Large Cap Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Large Cap and Large Cap

The main advantage of trading using opposite Large Cap and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap 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.
The idea behind Large Cap E and Large Cap Growth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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

Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
Fundamental Analysis
View fundamental data based on most recent published financial statements
Investing Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Bond Analysis
Evaluate and analyze corporate bonds as a potential investment for your portfolios.
Bonds Directory
Find actively traded corporate debentures issued by US companies