Correlation Between Advantage Portfolio and Large Cap
Can any of the company-specific risk be diversified away by investing in both Advantage Portfolio 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 Advantage Portfolio and Large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advantage Portfolio Class and Large Cap Equity, you can compare the effects of market volatilities on Advantage Portfolio 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 Advantage Portfolio with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantage Portfolio and Large Cap.
Diversification Opportunities for Advantage Portfolio and Large Cap
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Advantage and Large is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Advantage Portfolio Class 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 Advantage Portfolio 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 Advantage Portfolio Class 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 Advantage Portfolio i.e., Advantage Portfolio and Large Cap go up and down completely randomly.
Pair Corralation between Advantage Portfolio and Large Cap
Assuming the 90 days horizon Advantage Portfolio Class is expected to generate 2.0 times more return on investment than Large Cap. However, Advantage Portfolio is 2.0 times more volatile than Large Cap Equity. It trades about 0.08 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 1,255 in Advantage Portfolio Class on October 28, 2024 and sell it today you would earn a total of 953.00 from holding Advantage Portfolio Class or generate 75.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advantage Portfolio Class vs. Large Cap Equity
Performance |
| Timeline |
| Advantage Portfolio Class |
| Large Cap Equity |
Advantage Portfolio and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advantage Portfolio and Large Cap
The main advantage of trading using opposite Advantage Portfolio and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advantage Portfolio 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.| Advantage Portfolio vs. Wells Fargo Diversified | Advantage Portfolio vs. Fulcrum Diversified Absolute | Advantage Portfolio vs. Vy T Rowe | Advantage Portfolio vs. Stone Ridge Diversified |
| Large Cap vs. Transamerica Asset Allocation | Large Cap vs. Vy T Rowe | Large Cap vs. Tiaa Cref Lifestyle Servative | Large Cap vs. Delaware Limited Term Diversified |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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