Correlation Between College Retirement and Large Cap
Can any of the company-specific risk be diversified away by investing in both College Retirement and Large Cap 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 College Retirement and Large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between College Retirement Equities and Large Cap E, you can compare the effects of market volatilities on College Retirement and Large Cap 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 College Retirement with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of College Retirement and Large Cap.
Diversification Opportunities for College Retirement and Large Cap
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between College and Large is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding College Retirement Equities and Large Cap E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap E and College Retirement 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 College Retirement Equities are associated (or correlated) with Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap E has no effect on the direction of College Retirement i.e., College Retirement and Large Cap go up and down completely randomly.
Pair Corralation between College Retirement and Large Cap
Assuming the 90 days trading horizon College Retirement Equities is expected to generate 0.21 times more return on investment than Large Cap. However, College Retirement Equities is 4.83 times less risky than Large Cap. It trades about -0.21 of its potential returns per unit of risk. Large Cap E is currently generating about -0.26 per unit of risk. If you would invest 35,026 in College Retirement Equities on October 14, 2024 and sell it today you would lose (1,327) from holding College Retirement Equities or give up 3.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
College Retirement Equities vs. Large Cap E
Performance |
| Timeline |
| College Retirement |
| Large Cap E |
College Retirement and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with College Retirement and Large Cap
The main advantage of trading using opposite College Retirement and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if College Retirement position performs unexpectedly, Large Cap 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 Large Cap will offset losses from the drop in Large Cap's long position.| College Retirement vs. Hennessy Bp Energy | College Retirement vs. Vanguard Energy Index | College Retirement vs. Thrivent Natural Resources | College Retirement vs. Pimco Energy Tactical |
| Large Cap vs. Moderately Aggressive Balanced | Large Cap vs. Qs Moderate Growth | Large Cap vs. College Retirement Equities | Large Cap vs. Voya Target Retirement |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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