Correlation Between Growth Opportunities and Large Cap
Can any of the company-specific risk be diversified away by investing in both Growth Opportunities 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 Growth Opportunities and Large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Opportunities Fund and Large Cap Fund, you can compare the effects of market volatilities on Growth Opportunities 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 Growth Opportunities with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Opportunities and Large Cap.
Diversification Opportunities for Growth Opportunities and Large Cap
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Growth and Large is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Growth Opportunities Fund and Large Cap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Fund and Growth Opportunities 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 Growth Opportunities Fund 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 Fund has no effect on the direction of Growth Opportunities i.e., Growth Opportunities and Large Cap go up and down completely randomly.
Pair Corralation between Growth Opportunities and Large Cap
Assuming the 90 days horizon Growth Opportunities Fund is expected to generate 1.12 times more return on investment than Large Cap. However, Growth Opportunities is 1.12 times more volatile than Large Cap Fund. It trades about 0.11 of its potential returns per unit of risk. Large Cap Fund is currently generating about 0.07 per unit of risk. If you would invest 3,580 in Growth Opportunities Fund on August 31, 2024 and sell it today you would earn a total of 1,725 from holding Growth Opportunities Fund or generate 48.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Growth Opportunities Fund vs. Large Cap Fund
Performance |
| Timeline |
| Growth Opportunities |
| Large Cap Fund |
Growth Opportunities and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Opportunities and Large Cap
The main advantage of trading using opposite Growth Opportunities and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Opportunities 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.| Growth Opportunities vs. Europacific Growth Fund | Growth Opportunities vs. Washington Mutual Investors | Growth Opportunities vs. Capital World Growth | Growth Opportunities vs. HUMANA INC |
| Large Cap vs. Wasatch Large Cap | Large Cap vs. Loomis Sayles Bond | Large Cap vs. Harbor International Fund | Large Cap vs. Equity Series Class |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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