Correlation Between Large-cap Growth and M Large
Can any of the company-specific risk be diversified away by investing in both Large-cap Growth and M Large 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 Growth and M Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Large Cap Growth Profund and M Large Cap, you can compare the effects of market volatilities on Large-cap Growth and M Large 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 Growth with a short position of M Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large-cap Growth and M Large.
Diversification Opportunities for Large-cap Growth and M Large
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Large-cap and MTCGX is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth Profund and M Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Large Cap and Large-cap Growth 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 Profund are associated (or correlated) with M Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Large Cap has no effect on the direction of Large-cap Growth i.e., Large-cap Growth and M Large go up and down completely randomly.
Pair Corralation between Large-cap Growth and M Large
Assuming the 90 days horizon Large Cap Growth Profund is expected to under-perform the M Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Large Cap Growth Profund is 1.24 times less risky than M Large. The mutual fund trades about -0.06 of its potential returns per unit of risk. The M Large Cap is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 3,340 in M Large Cap on November 30, 2024 and sell it today you would lose (34.00) from holding M Large Cap or give up 1.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Large Cap Growth Profund vs. M Large Cap
Performance |
| Timeline |
| Large Cap Growth |
| M Large Cap |
Large-cap Growth and M Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large-cap Growth and M Large
The main advantage of trading using opposite Large-cap Growth and M Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large-cap Growth position performs unexpectedly, M Large 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 M Large will offset losses from the drop in M Large's long position.| Large-cap Growth vs. Small Pany Growth | Large-cap Growth vs. Transamerica International Small | Large-cap Growth vs. Ab Small Cap | Large-cap Growth vs. Champlain Small |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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