Correlation Between Fundamental Large and Extended Market
Can any of the company-specific risk be diversified away by investing in both Fundamental Large and Extended 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 Fundamental Large and Extended Market 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 Extended Market Index, you can compare the effects of market volatilities on Fundamental Large and Extended 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 Fundamental Large with a short position of Extended Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundamental Large and Extended Market.
Diversification Opportunities for Fundamental Large and Extended Market
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fundamental and Extended is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and Extended Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extended Market Index 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 Extended Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extended Market Index has no effect on the direction of Fundamental Large i.e., Fundamental Large and Extended Market go up and down completely randomly.
Pair Corralation between Fundamental Large and Extended Market
Assuming the 90 days horizon Fundamental Large Cap is expected to generate 0.37 times more return on investment than Extended Market. However, Fundamental Large Cap is 2.73 times less risky than Extended Market. It trades about -0.11 of its potential returns per unit of risk. Extended Market Index is currently generating about -0.28 per unit of risk. If you would invest 6,867 in Fundamental Large Cap on October 11, 2024 and sell it today you would lose (154.00) from holding Fundamental Large Cap or give up 2.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fundamental Large Cap vs. Extended Market Index
Performance |
| Timeline |
| Fundamental Large Cap |
| Extended Market Index |
Fundamental Large and Extended Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fundamental Large and Extended Market
The main advantage of trading using opposite Fundamental Large and Extended Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundamental Large position performs unexpectedly, Extended 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 Extended Market will offset losses from the drop in Extended Market's long position.| Fundamental Large vs. Ab Small Cap | Fundamental Large vs. Rationalpier 88 Convertible | Fundamental Large vs. Issachar Fund Class | Fundamental Large vs. Predex Funds |
| Extended Market vs. M Large Cap | Extended Market vs. Qs Large Cap | Extended Market vs. Fundamental Large Cap | Extended Market vs. Guidemark Large Cap |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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