Correlation Between Avantis Us and Large-cap Growth

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

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

Diversification Opportunities for Avantis Us and Large-cap Growth

0.06

Correlation Coefficient

Avantis Us  Large-cap Growth

Significant diversification

The 3 months correlation between Avantis and Large-cap is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Large Cap 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 Avantis Us 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 Avantis Large Cap are associated (or correlated) with Large-cap Growth. 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 Avantis Us i.e., Avantis Us and Large-cap Growth go up and down completely randomly.

Pair Corralation between Avantis Us and Large-cap Growth

Assuming the 90 days horizon Avantis Large Cap is expected to under-perform the Large-cap Growth. But the mutual fund apears to be less risky and, when comparing its historical volatility, Avantis Large Cap is 1.54 times less risky than Large-cap Growth. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Large Cap Growth Profund is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,641  in Large Cap Growth Profund on December 4, 2024 and sell it today you would lose (116.00) from holding Large Cap Growth Profund or give up 2.5% of portfolio value over 90 days.

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

Avantis Large Cap  vs.  Large Cap Growth Profund

Avantis Large Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Avantis Us and Large-cap Growth

The main advantage of trading using opposite Avantis Us and Large-cap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Us position performs unexpectedly, Large-cap Growth 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 Growth will offset losses from the drop in Large-cap Growth's long position.

The idea behind Avantis Large Cap and Large Cap Growth Profund 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.