Correlation Between Large Cap and Global Advantage
Can any of the company-specific risk be diversified away by investing in both Large Cap and Global Advantage 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 Global Advantage 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 Global Advantage Portfolio, you can compare the effects of market volatilities on Large Cap and Global Advantage 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 Global Advantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Global Advantage.
Diversification Opportunities for Large Cap and Global Advantage
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Large and Global is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Equity and Global Advantage Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Advantage Por 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 Global Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Advantage Por has no effect on the direction of Large Cap i.e., Large Cap and Global Advantage go up and down completely randomly.
Pair Corralation between Large Cap and Global Advantage
Assuming the 90 days horizon Large Cap is expected to generate 3.41 times less return on investment than Global Advantage. But when comparing it to its historical volatility, Large Cap Equity is 2.47 times less risky than Global Advantage. It trades about 0.38 of its potential returns per unit of risk. Global Advantage Portfolio is currently generating about 0.53 of returns per unit of risk over similar time horizon. If you would invest 1,485 in Global Advantage Portfolio on September 1, 2024 and sell it today you would earn a total of 338.00 from holding Global Advantage Portfolio or generate 22.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Large Cap Equity vs. Global Advantage Portfolio
Performance |
| Timeline |
| Large Cap Equity |
| Global Advantage Por |
Large Cap and Global Advantage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Cap and Global Advantage
The main advantage of trading using opposite Large Cap and Global Advantage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap position performs unexpectedly, Global Advantage 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 Global Advantage will offset losses from the drop in Global Advantage's long position.| Large Cap vs. Putnam Convertible Incm Gwth | Large Cap vs. Fidelity Sai Convertible | Large Cap vs. Allianzgi Convertible Income | Large Cap vs. Calamos Dynamic Convertible |
| Global Advantage vs. Emerging Markets Equity | Global Advantage vs. Global Fixed Income | Global Advantage vs. Global Fixed Income | Global Advantage 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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