Correlation Between Large Cap and International Equity
Can any of the company-specific risk be diversified away by investing in both Large Cap and International Equity 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 International Equity 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 International Equity Index, you can compare the effects of market volatilities on Large Cap and International Equity 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 International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and International Equity.
Diversification Opportunities for Large Cap and International Equity
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Large and International is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth Profund and International Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity 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 Profund are associated (or correlated) with International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Large Cap i.e., Large Cap and International Equity go up and down completely randomly.
Pair Corralation between Large Cap and International Equity
Assuming the 90 days horizon Large Cap Growth Profund is expected to generate 1.26 times more return on investment than International Equity. However, Large Cap is 1.26 times more volatile than International Equity Index. It trades about 0.11 of its potential returns per unit of risk. International Equity Index is currently generating about 0.04 per unit of risk. If you would invest 3,234 in Large Cap Growth Profund on September 12, 2024 and sell it today you would earn a total of 1,401 from holding Large Cap Growth Profund or generate 43.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.27% |
| Values | Daily Returns |
Large Cap Growth Profund vs. International Equity Index
Performance |
| Timeline |
| Large Cap Growth |
| International Equity |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Large Cap and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Cap and International Equity
The main advantage of trading using opposite Large Cap and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap position performs unexpectedly, International Equity 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 International Equity will offset losses from the drop in International Equity's long position.| Large Cap vs. Stone Ridge Diversified | Large Cap vs. Calvert Conservative Allocation | Large Cap vs. Guggenheim Diversified Income | Large Cap vs. Blackrock Conservative Prprdptfinstttnl |
| International Equity vs. Virtus Nfj Large Cap | International Equity vs. M Large Cap | International Equity vs. Large Cap Growth Profund | International Equity vs. Dana Large Cap |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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