Correlation Between Equity Income and Largecap Growth
Can any of the company-specific risk be diversified away by investing in both Equity Income and Largecap Growth 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 Equity Income and Largecap Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Income Fund and Largecap Growth Fund, you can compare the effects of market volatilities on Equity Income and Largecap Growth 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 Equity Income with a short position of Largecap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Income and Largecap Growth.
Diversification Opportunities for Equity Income and Largecap Growth
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Equity and Largecap is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Equity Income Fund and Largecap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Largecap Growth and Equity Income 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 Equity Income Fund are associated (or correlated) with Largecap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Largecap Growth has no effect on the direction of Equity Income i.e., Equity Income and Largecap Growth go up and down completely randomly.
Pair Corralation between Equity Income and Largecap Growth
Assuming the 90 days horizon Equity Income Fund is expected to generate 0.69 times more return on investment than Largecap Growth. However, Equity Income Fund is 1.45 times less risky than Largecap Growth. It trades about 0.18 of its potential returns per unit of risk. Largecap Growth Fund is currently generating about 0.05 per unit of risk. If you would invest 3,960 in Equity Income Fund on October 25, 2024 and sell it today you would earn a total of 96.00 from holding Equity Income Fund or generate 2.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Income Fund vs. Largecap Growth Fund
Performance |
| Timeline |
| Equity Income |
| Largecap Growth |
Equity Income and Largecap Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Income and Largecap Growth
The main advantage of trading using opposite Equity Income and Largecap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Income position performs unexpectedly, Largecap Growth 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 Largecap Growth will offset losses from the drop in Largecap Growth's long position.| Equity Income vs. Bbh Intermediate Municipal | Equity Income vs. Blackrock Pa Muni | Equity Income vs. Blrc Sgy Mnp | Equity Income vs. Ab Municipal Bond |
| Largecap Growth vs. Lord Abbett Government | Largecap Growth vs. Dws Government Money | Largecap Growth vs. Davis Government Bond | Largecap Growth vs. Ridgeworth Seix Government |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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