Correlation Between Total Return and Fundamental Large
Can any of the company-specific risk be diversified away by investing in both Total Return and Fundamental 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 Total Return and Fundamental Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Return Bond and Fundamental Large Cap, you can compare the effects of market volatilities on Total Return and Fundamental 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 Total Return with a short position of Fundamental Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Return and Fundamental Large.
Diversification Opportunities for Total Return and Fundamental Large
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Total and FUNDAMENTAL is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Bond and Fundamental Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Large Cap and Total Return 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 Total Return Bond are associated (or correlated) with Fundamental Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Large Cap has no effect on the direction of Total Return i.e., Total Return and Fundamental Large go up and down completely randomly.
Pair Corralation between Total Return and Fundamental Large
Assuming the 90 days horizon Total Return is expected to generate 6.39 times less return on investment than Fundamental Large. But when comparing it to its historical volatility, Total Return Bond is 2.12 times less risky than Fundamental Large. It trades about 0.12 of its potential returns per unit of risk. Fundamental Large Cap is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 7,810 in Fundamental Large Cap on September 4, 2024 and sell it today you would earn a total of 476.00 from holding Fundamental Large Cap or generate 6.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Total Return Bond vs. Fundamental Large Cap
Performance |
| Timeline |
| Total Return Bond |
| Fundamental Large Cap |
Total Return and Fundamental Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Return and Fundamental Large
The main advantage of trading using opposite Total Return and Fundamental Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Return position performs unexpectedly, Fundamental 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 Fundamental Large will offset losses from the drop in Fundamental Large's long position.| Total Return vs. Goldman Sachs Short | Total Return vs. Sprott Gold Equity | Total Return vs. Global Gold Fund | Total Return vs. Oppenheimer Gold Special |
| Fundamental Large vs. Regional Bank Fund | Fundamental Large vs. Regional Bank Fund | Fundamental Large vs. Multimanager Lifestyle Moderate | Fundamental Large vs. Multimanager Lifestyle Balanced |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |