Correlation Between Large Capitalization and Salient Alternative
Can any of the company-specific risk be diversified away by investing in both Large Capitalization and Salient Alternative 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 Large Capitalization and Salient Alternative into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Large Capitalization Growth and Salient Alternative Beta, you can compare the effects of market volatilities on Large Capitalization and Salient Alternative 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 Large Capitalization with a short position of Salient Alternative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Capitalization and Salient Alternative.
Diversification Opportunities for Large Capitalization and Salient Alternative
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Large and Salient is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Large Capitalization Growth and Salient Alternative Beta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salient Alternative Beta and Large Capitalization 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 Large Capitalization Growth are associated (or correlated) with Salient Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salient Alternative Beta has no effect on the direction of Large Capitalization i.e., Large Capitalization and Salient Alternative go up and down completely randomly.
Pair Corralation between Large Capitalization and Salient Alternative
Assuming the 90 days horizon Large Capitalization Growth is expected to generate 1.58 times more return on investment than Salient Alternative. However, Large Capitalization is 1.58 times more volatile than Salient Alternative Beta. It trades about 0.31 of its potential returns per unit of risk. Salient Alternative Beta is currently generating about 0.2 per unit of risk. If you would invest 2,732 in Large Capitalization Growth on August 25, 2024 and sell it today you would earn a total of 208.00 from holding Large Capitalization Growth or generate 7.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Large Capitalization Growth vs. Salient Alternative Beta
Performance |
| Timeline |
| Large Capitalization |
| Salient Alternative Beta |
Large Capitalization and Salient Alternative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Capitalization and Salient Alternative
The main advantage of trading using opposite Large Capitalization and Salient Alternative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Capitalization position performs unexpectedly, Salient Alternative 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 Salient Alternative will offset losses from the drop in Salient Alternative's long position.| Large Capitalization vs. Salient Alternative Beta | Large Capitalization vs. Aggressive Balanced Allocation | Large Capitalization vs. Salient Alternative Beta | Large Capitalization vs. Salient Mlp Fund |
| Salient Alternative vs. Barings Active Short | Salient Alternative vs. Bbh Intermediate Municipal | Salient Alternative vs. Chartwell Short Duration | Salient Alternative vs. Multisector Bond Sma |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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