Correlation Between Extended Market and Value Fund
Can any of the company-specific risk be diversified away by investing in both Extended Market and Value Fund 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 Extended Market and Value Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Value Fund Value, you can compare the effects of market volatilities on Extended Market and Value Fund 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 Extended Market with a short position of Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Value Fund.
Diversification Opportunities for Extended Market and Value Fund
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Extended and Value is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Value Fund Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund Value and Extended Market 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 Extended Market Index are associated (or correlated) with Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund Value has no effect on the direction of Extended Market i.e., Extended Market and Value Fund go up and down completely randomly.
Pair Corralation between Extended Market and Value Fund
Assuming the 90 days horizon Extended Market is expected to generate 1.06 times less return on investment than Value Fund. In addition to that, Extended Market is 1.6 times more volatile than Value Fund Value. It trades about 0.08 of its total potential returns per unit of risk. Value Fund Value is currently generating about 0.13 per unit of volatility. If you would invest 1,826 in Value Fund Value on August 25, 2024 and sell it today you would earn a total of 401.00 from holding Value Fund Value or generate 21.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Value Fund Value
Performance |
| Timeline |
| Extended Market Index |
| Value Fund Value |
Extended Market and Value Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Value Fund
The main advantage of trading using opposite Extended Market and Value Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market position performs unexpectedly, Value Fund 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 Value Fund will offset losses from the drop in Value Fund's long position.| Extended Market vs. T Rowe Price | Extended Market vs. Touchstone Large Cap | Extended Market vs. Legg Mason Bw | Extended Market vs. Aqr Large Cap |
| Value Fund vs. T Rowe Price | Value Fund vs. Praxis Growth Index | Value Fund vs. Pioneer Fundamental Growth | Value Fund vs. T Rowe Price |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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