Correlation Between Energy Basic and Large Cap
Can any of the company-specific risk be diversified away by investing in both Energy Basic 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 Energy Basic and Large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Basic Materials and Large Cap Value, you can compare the effects of market volatilities on Energy Basic 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 Energy Basic with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Basic and Large Cap.
Diversification Opportunities for Energy Basic and Large Cap
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Energy and Large is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Energy Basic Materials 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 Energy Basic 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 Energy Basic Materials 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 Energy Basic i.e., Energy Basic and Large Cap go up and down completely randomly.
Pair Corralation between Energy Basic and Large Cap
Assuming the 90 days horizon Energy Basic is expected to generate 1.41 times less return on investment than Large Cap. In addition to that, Energy Basic is 1.29 times more volatile than Large Cap Value. It trades about 0.17 of its total potential returns per unit of risk. Large Cap Value is currently generating about 0.3 per unit of volatility. If you would invest 1,621 in Large Cap Value on April 25, 2025 and sell it today you would earn a total of 223.00 from holding Large Cap Value or generate 13.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Basic Materials vs. Large Cap Value
Performance |
| Timeline |
| Energy Basic Materials |
| Large Cap Value |
Energy Basic and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Basic and Large Cap
The main advantage of trading using opposite Energy Basic and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Basic 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.| Energy Basic vs. Pender Real Estate | Energy Basic vs. Fidelity Real Estate | Energy Basic vs. Vanguard Reit Index | Energy Basic vs. Tiaa Cref Real Estate |
| Large Cap vs. Short Term Investment Trust | Large Cap vs. John Hancock Variable | Large Cap vs. Virtus Seix Government | Large Cap 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |