Correlation Between Akre Focus and Large Cap

Can any of the company-specific risk be diversified away by investing in both Akre Focus 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 Akre Focus and Large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Akre Focus Fund and Large Cap Growth, you can compare the effects of market volatilities on Akre Focus 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 Akre Focus with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Akre Focus and Large Cap.

Diversification Opportunities for Akre Focus and Large Cap

0.68

Correlation Coefficient

Akre Focus  Large Cap

Poor diversification

The 3 months correlation between Akre and Large is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Akre Focus Fund and Large Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Growth and Akre Focus 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 Akre Focus Fund 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 Akre Focus i.e., Akre Focus and Large Cap go up and down completely randomly.

Pair Corralation between Akre Focus and Large Cap

Assuming the 90 days horizon Akre Focus Fund is expected to generate 0.81 times more return on investment than Large Cap. However, Akre Focus Fund is 1.23 times less risky than Large Cap. It trades about 0.05 of its potential returns per unit of risk. Large Cap Growth is currently generating about -0.04 per unit of risk. If you would invest  6,458  in Akre Focus Fund on December 28, 2024 and sell it today you would earn a total of  177.00  from holding Akre Focus Fund or generate 2.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Akre Focus Fund  vs.  Large Cap Growth

Akre Focus Fund

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Akre Focus Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Akre Focus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Large Cap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Large Cap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Large Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Akre Focus and Large Cap

The main advantage of trading using opposite Akre Focus and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Akre Focus 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.

The idea behind Akre Focus Fund and Large Cap Growth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.