Correlation Between Large Cap and Moderately Aggressive
Can any of the company-specific risk be diversified away by investing in both Large Cap and Moderately Aggressive 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 Moderately Aggressive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Large Cap Value and Moderately Aggressive Balanced, you can compare the effects of market volatilities on Large Cap and Moderately Aggressive 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 Moderately Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Moderately Aggressive.
Diversification Opportunities for Large Cap and Moderately Aggressive
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Large and Moderately is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Value and Moderately Aggressive Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderately Aggressive 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 Value are associated (or correlated) with Moderately Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderately Aggressive has no effect on the direction of Large Cap i.e., Large Cap and Moderately Aggressive go up and down completely randomly.
Pair Corralation between Large Cap and Moderately Aggressive
Assuming the 90 days horizon Large Cap Value is expected to generate 1.44 times more return on investment than Moderately Aggressive. However, Large Cap is 1.44 times more volatile than Moderately Aggressive Balanced. It trades about 0.06 of its potential returns per unit of risk. Moderately Aggressive Balanced is currently generating about 0.08 per unit of risk. If you would invest 1,561 in Large Cap Value on April 30, 2025 and sell it today you would earn a total of 279.00 from holding Large Cap Value or generate 17.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.59% |
| Values | Daily Returns |
Large Cap Value vs. Moderately Aggressive Balanced
Performance |
| Timeline |
| Large Cap Value |
| Moderately Aggressive |
Large Cap and Moderately Aggressive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Cap and Moderately Aggressive
The main advantage of trading using opposite Large Cap and Moderately Aggressive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap position performs unexpectedly, Moderately Aggressive 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 Moderately Aggressive will offset losses from the drop in Moderately Aggressive's long position.| Large Cap vs. Gmo High Yield | Large Cap vs. Rbc Ultra Short Fixed | Large Cap vs. Morningstar Defensive Bond | Large Cap vs. Versatile Bond Portfolio |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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