Correlation Between Global Core and Large Cap
Can any of the company-specific risk be diversified away by investing in both Global Core 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 Global Core and Large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global E Portfolio and Large Cap Equity, you can compare the effects of market volatilities on Global Core 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 Global Core with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Core and Large Cap.
Diversification Opportunities for Global Core and Large Cap
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Global and Large is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Global E Portfolio and Large Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Equity and Global Core 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 Global E Portfolio 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 Equity has no effect on the direction of Global Core i.e., Global Core and Large Cap go up and down completely randomly.
Pair Corralation between Global Core and Large Cap
Assuming the 90 days horizon Global E Portfolio is expected to generate 0.96 times more return on investment than Large Cap. However, Global E Portfolio is 1.04 times less risky than Large Cap. It trades about 0.14 of its potential returns per unit of risk. Large Cap Equity is currently generating about 0.08 per unit of risk. If you would invest 1,637 in Global E Portfolio on September 3, 2024 and sell it today you would earn a total of 526.00 from holding Global E Portfolio or generate 32.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global E Portfolio vs. Large Cap Equity
Performance |
| Timeline |
| Global E Portfolio |
| Large Cap Equity |
Global Core and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Core and Large Cap
The main advantage of trading using opposite Global Core and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Core 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.| Global Core vs. Health Biotchnology Portfolio | Global Core vs. Alphacentric Lifesci Healthcare | Global Core vs. Highland Longshort Healthcare | Global Core vs. Fidelity Advisor Health |
| Large Cap vs. Calvert High Yield | Large Cap vs. Goldman Sachs High | Large Cap vs. Lord Abbett High | Large Cap vs. Pioneer High Yield |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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