Correlation Between Largecap Growth and Blue Chip
Can any of the company-specific risk be diversified away by investing in both Largecap Growth and Blue Chip 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 Growth and Blue Chip into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Largecap Growth Fund and Blue Chip Fund, you can compare the effects of market volatilities on Largecap Growth and Blue Chip 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 Growth with a short position of Blue Chip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Largecap Growth and Blue Chip.
Diversification Opportunities for Largecap Growth and Blue Chip
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Largecap and Blue is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Largecap Growth Fund and Blue Chip Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Chip Fund and Largecap Growth 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 Growth Fund are associated (or correlated) with Blue Chip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Chip Fund has no effect on the direction of Largecap Growth i.e., Largecap Growth and Blue Chip go up and down completely randomly.
Pair Corralation between Largecap Growth and Blue Chip
Assuming the 90 days horizon Largecap Growth is expected to generate 2.15 times less return on investment than Blue Chip. In addition to that, Largecap Growth is 1.71 times more volatile than Blue Chip Fund. It trades about 0.03 of its total potential returns per unit of risk. Blue Chip Fund is currently generating about 0.11 per unit of volatility. If you would invest 2,759 in Blue Chip Fund on November 29, 2024 and sell it today you would earn a total of 1,702 from holding Blue Chip Fund or generate 61.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Largecap Growth Fund vs. Blue Chip Fund
Performance |
| Timeline |
| Largecap Growth |
| Blue Chip Fund |
Largecap Growth and Blue Chip Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Largecap Growth and Blue Chip
The main advantage of trading using opposite Largecap Growth and Blue Chip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Largecap Growth position performs unexpectedly, Blue Chip 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 Blue Chip will offset losses from the drop in Blue Chip's long position.| Largecap Growth vs. The Gabelli Healthcare | Largecap Growth vs. Lord Abbett Health | Largecap Growth vs. Putnam Global Health | Largecap Growth vs. Blackrock Health Sciences |
| Blue Chip vs. Midcap Fund Class | Blue Chip vs. Equity Income Fund | Blue Chip vs. Largecap Growth Fund | Blue Chip vs. Smallcap Fund Fka |
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.
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