Correlation Between M Large and Financial Industries
Can any of the company-specific risk be diversified away by investing in both M Large and Financial Industries 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 M Large and Financial Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between M Large Cap and Financial Industries Fund, you can compare the effects of market volatilities on M Large and Financial Industries 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 M Large with a short position of Financial Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Large and Financial Industries.
Diversification Opportunities for M Large and Financial Industries
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MTCGX and Financial is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries and M Large 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 M Large Cap are associated (or correlated) with Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of M Large i.e., M Large and Financial Industries go up and down completely randomly.
Pair Corralation between M Large and Financial Industries
Assuming the 90 days horizon M Large is expected to generate 3.7 times less return on investment than Financial Industries. In addition to that, M Large is 1.14 times more volatile than Financial Industries Fund. It trades about 0.04 of its total potential returns per unit of risk. Financial Industries Fund is currently generating about 0.16 per unit of volatility. If you would invest 1,636 in Financial Industries Fund on September 15, 2024 and sell it today you would earn a total of 411.00 from holding Financial Industries Fund or generate 25.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
M Large Cap vs. Financial Industries Fund
Performance |
| Timeline |
| M Large Cap |
| Financial Industries |
M Large and Financial Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with M Large and Financial Industries
The main advantage of trading using opposite M Large and Financial Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M Large position performs unexpectedly, Financial Industries 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 Financial Industries will offset losses from the drop in Financial Industries' long position.| M Large vs. Washington Mutual Investors | M Large vs. Morningstar Unconstrained Allocation | M Large vs. T Rowe Price | M Large vs. Old Westbury Large |
| Financial Industries vs. M Large Cap | Financial Industries vs. Virtus Nfj Large Cap | Financial Industries vs. Qs Large Cap | Financial Industries vs. Pace Large Value |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals |