Correlation Between Large Cap and International Investors
Can any of the company-specific risk be diversified away by investing in both Large Cap and International Investors 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 Cap and International Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Large Cap Equity and International Investors Gold, you can compare the effects of market volatilities on Large Cap and International Investors 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 Cap with a short position of International Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and International Investors.
Diversification Opportunities for Large Cap and International Investors
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Large and INTERNATIONAL is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Equity and International Investors Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Investors and Large Cap 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 Cap Equity are associated (or correlated) with International Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Investors has no effect on the direction of Large Cap i.e., Large Cap and International Investors go up and down completely randomly.
Pair Corralation between Large Cap and International Investors
Assuming the 90 days horizon Large Cap Equity is expected to generate 0.42 times more return on investment than International Investors. However, Large Cap Equity is 2.36 times less risky than International Investors. It trades about 0.15 of its potential returns per unit of risk. International Investors Gold is currently generating about 0.06 per unit of risk. If you would invest 2,101 in Large Cap Equity on September 2, 2024 and sell it today you would earn a total of 661.00 from holding Large Cap Equity or generate 31.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Large Cap Equity vs. International Investors Gold
Performance |
| Timeline |
| Large Cap Equity |
| International Investors |
Large Cap and International Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Cap and International Investors
The main advantage of trading using opposite Large Cap and International Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap position performs unexpectedly, International Investors 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 International Investors will offset losses from the drop in International Investors' long position.| Large Cap vs. Emerging Markets Equity | Large Cap vs. Global Fixed Income | Large Cap vs. Global Fixed Income | Large Cap vs. Global Fixed Income |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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