Correlation Between Largecap and Bond Market
Can any of the company-specific risk be diversified away by investing in both Largecap and Bond Market 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 Largecap and Bond Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Largecap Sp 500 and Bond Market Index, you can compare the effects of market volatilities on Largecap and Bond Market 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 Largecap with a short position of Bond Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Largecap and Bond Market.
Diversification Opportunities for Largecap and Bond Market
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Largecap and Bond is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Largecap Sp 500 and Bond Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bond Market Index and Largecap 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 Largecap Sp 500 are associated (or correlated) with Bond Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bond Market Index has no effect on the direction of Largecap i.e., Largecap and Bond Market go up and down completely randomly.
Pair Corralation between Largecap and Bond Market
Assuming the 90 days horizon Largecap Sp 500 is expected to generate 2.34 times more return on investment than Bond Market. However, Largecap is 2.34 times more volatile than Bond Market Index. It trades about 0.16 of its potential returns per unit of risk. Bond Market Index is currently generating about 0.06 per unit of risk. If you would invest 2,873 in Largecap Sp 500 on August 28, 2024 and sell it today you would earn a total of 85.00 from holding Largecap Sp 500 or generate 2.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Largecap Sp 500 vs. Bond Market Index
Performance |
| Timeline |
| Largecap Sp 500 |
| Bond Market Index |
Largecap and Bond Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Largecap and Bond Market
The main advantage of trading using opposite Largecap and Bond Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Largecap position performs unexpectedly, Bond Market 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 Bond Market will offset losses from the drop in Bond Market's long position.| Largecap vs. Strategic Asset Management | Largecap vs. Strategic Asset Management | Largecap vs. Strategic Asset Management | Largecap vs. Strategic Asset Management |
| Bond Market vs. Strategic Asset Management | Bond Market vs. Strategic Asset Management | Bond Market vs. Strategic Asset Management | Bond Market vs. Strategic Asset Management |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |