Correlation Between The National and Large Cap

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

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

Diversification Opportunities for The National and Large Cap

-0.3

Correlation Coefficient

The National  Large Cap

Very good diversification

The 3 months correlation between The and Large is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free 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 The National 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 The National Tax Free 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 The National i.e., The National and Large Cap go up and down completely randomly.

Pair Corralation between The National and Large Cap

Assuming the 90 days horizon The National Tax Free is expected to generate 0.12 times more return on investment than Large Cap. However, The National Tax Free is 8.3 times less risky than Large Cap. It trades about 0.1 of its potential returns per unit of risk. Large Cap Growth Profund is currently generating about -0.11 per unit of risk. If you would invest  1,840  in The National Tax Free on December 22, 2024 and sell it today you would earn a total of  18.00  from holding The National Tax Free or generate 0.98% return on investment over 90 days.

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

The National Tax Free  vs.  Large Cap Growth Profund

National Tax

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The National Tax Free are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, The National 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 latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with The National and Large Cap

The main advantage of trading using opposite The National and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The National 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 The National Tax Free 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 Commodity Directory module to find actively traded commodities issued by global exchanges.