Correlation Between Applied Finance and Large Cap
Can any of the company-specific risk be diversified away by investing in both Applied Finance 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 Applied Finance and Large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Explorer and Large Cap Growth Profund, you can compare the effects of market volatilities on Applied Finance 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 Applied Finance with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Large Cap.
Diversification Opportunities for Applied Finance and Large Cap
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Applied and Large is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Large Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Growth and Applied Finance 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 Applied Finance Explorer 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 Growth has no effect on the direction of Applied Finance i.e., Applied Finance and Large Cap go up and down completely randomly.
Pair Corralation between Applied Finance and Large Cap
Assuming the 90 days horizon Applied Finance Explorer is expected to generate 1.43 times more return on investment than Large Cap. However, Applied Finance is 1.43 times more volatile than Large Cap Growth Profund. It trades about 0.3 of its potential returns per unit of risk. Large Cap Growth Profund is currently generating about 0.1 per unit of risk. If you would invest 2,198 in Applied Finance Explorer on May 31, 2025 and sell it today you would earn a total of 187.00 from holding Applied Finance Explorer or generate 8.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Finance Explorer vs. Large Cap Growth Profund
Performance |
| Timeline |
| Applied Finance Explorer |
| Large Cap Growth |
Applied Finance and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Finance and Large Cap
The main advantage of trading using opposite Applied Finance and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance 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.| Applied Finance vs. Applied Finance Core | Applied Finance vs. Applied Finance Core | Applied Finance vs. Applied Finance Explorer | Applied Finance vs. Applied Finance Select |
| Large Cap vs. Small Cap Profund Small Cap | Large Cap vs. Mid Cap Profund Mid Cap | Large Cap vs. Small Cap Growth Profund | Large Cap vs. Mid Cap Growth Profund |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |