Correlation Between Fundamental Large and M Large
Can any of the company-specific risk be diversified away by investing in both Fundamental Large and M Large 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 Fundamental Large and M Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fundamental Large Cap and M Large Cap, you can compare the effects of market volatilities on Fundamental Large and M Large 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 Fundamental Large with a short position of M Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundamental Large and M Large.
Diversification Opportunities for Fundamental Large and M Large
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fundamental and MTCGX is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and M Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Large Cap and Fundamental Large 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 Fundamental Large Cap are associated (or correlated) with M Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Large Cap has no effect on the direction of Fundamental Large i.e., Fundamental Large and M Large go up and down completely randomly.
Pair Corralation between Fundamental Large and M Large
Assuming the 90 days horizon Fundamental Large is expected to generate 1.14 times less return on investment than M Large. But when comparing it to its historical volatility, Fundamental Large Cap is 1.41 times less risky than M Large. It trades about 0.12 of its potential returns per unit of risk. M Large Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,731 in M Large Cap on September 1, 2024 and sell it today you would earn a total of 960.00 from holding M Large Cap or generate 35.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
Fundamental Large Cap vs. M Large Cap
Performance |
| Timeline |
| Fundamental Large Cap |
| M Large Cap |
Fundamental Large and M Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fundamental Large and M Large
The main advantage of trading using opposite Fundamental Large and M Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundamental Large position performs unexpectedly, M Large 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 M Large will offset losses from the drop in M Large's long position.| Fundamental Large vs. Gabelli Global Financial | Fundamental Large vs. John Hancock Financial | Fundamental Large vs. Financials Ultrasector Profund | Fundamental Large vs. Davis Financial Fund |
| M Large vs. Government Securities Fund | M Large vs. Inverse Government Long | M Large vs. Dws Government Money | M Large vs. Dreyfus Government Cash |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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