Correlation Between M Large and Specialized Technology
Can any of the company-specific risk be diversified away by investing in both M Large and Specialized Technology 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 Specialized Technology 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 Specialized Technology Fund, you can compare the effects of market volatilities on M Large and Specialized Technology 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 Specialized Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Large and Specialized Technology.
Diversification Opportunities for M Large and Specialized Technology
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MTCGX and Specialized is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Specialized Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Specialized Technology 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 Specialized Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Specialized Technology has no effect on the direction of M Large i.e., M Large and Specialized Technology go up and down completely randomly.
Pair Corralation between M Large and Specialized Technology
Assuming the 90 days horizon M Large Cap is expected to generate 1.09 times more return on investment than Specialized Technology. However, M Large is 1.09 times more volatile than Specialized Technology Fund. It trades about 0.08 of its potential returns per unit of risk. Specialized Technology Fund is currently generating about 0.09 per unit of risk. If you would invest 2,422 in M Large Cap on September 14, 2024 and sell it today you would earn a total of 1,335 from holding M Large Cap or generate 55.12% 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. Specialized Technology Fund
Performance |
| Timeline |
| M Large Cap |
| Specialized Technology |
M Large and Specialized Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with M Large and Specialized Technology
The main advantage of trading using opposite M Large and Specialized Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M Large position performs unexpectedly, Specialized Technology 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 Specialized Technology will offset losses from the drop in Specialized Technology's long position.| M Large vs. Alliancebernstein National Municipal | M Large vs. Transamerica Intermediate Muni | M Large vs. Franklin High Yield | M Large vs. The National Tax Free |
| Specialized Technology vs. M Large Cap | Specialized Technology vs. Dunham Large Cap | Specialized Technology vs. Qs Large Cap | Specialized Technology vs. Transamerica 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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