Correlation Between Moderately Aggressive and Large Cap
Can any of the company-specific risk be diversified away by investing in both Moderately Aggressive 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 Moderately Aggressive and Large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Moderately Aggressive Balanced and Large Cap Value, you can compare the effects of market volatilities on Moderately Aggressive 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 Moderately Aggressive with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderately Aggressive and Large Cap.
Diversification Opportunities for Moderately Aggressive and Large Cap
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Moderately and Large is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Moderately Aggressive Balanced and Large Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Value and Moderately Aggressive 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 Moderately Aggressive Balanced 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 Value has no effect on the direction of Moderately Aggressive i.e., Moderately Aggressive and Large Cap go up and down completely randomly.
Pair Corralation between Moderately Aggressive and Large Cap
Assuming the 90 days horizon Moderately Aggressive is expected to generate 1.51 times less return on investment than Large Cap. But when comparing it to its historical volatility, Moderately Aggressive Balanced is 1.49 times less risky than Large Cap. It trades about 0.34 of its potential returns per unit of risk. Large Cap Value is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 1,516 in Large Cap Value on April 10, 2025 and sell it today you would earn a total of 321.00 from holding Large Cap Value or generate 21.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.36% |
| Values | Daily Returns |
Moderately Aggressive Balanced vs. Large Cap Value
Performance |
| Timeline |
| Moderately Aggressive |
| Large Cap Value |
Moderately Aggressive and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Moderately Aggressive and Large Cap
The main advantage of trading using opposite Moderately Aggressive and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moderately Aggressive 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.| Moderately Aggressive vs. Pace Smallmedium Value | Moderately Aggressive vs. Valic Company I | Moderately Aggressive vs. Queens Road Small | Moderately Aggressive vs. Lsv Small Cap |
| Large Cap vs. Gold And Precious | Large Cap vs. Goldman Sachs Dynamic | Large Cap vs. James Balanced Golden | Large Cap vs. Oppenheimer Gold Special |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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