Correlation Between Us Large and Us Lg

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

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

Diversification Opportunities for Us Large and Us Lg

0.96

Correlation Coefficient

Us Large  Us Lg

Almost no diversification

The 3 months correlation between DFUSX and DUSQX is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Us Large Pany and Us Lg Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Lg Cap and Us Large 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 Us Large Pany are associated (or correlated) with Us Lg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Lg Cap has no effect on the direction of Us Large i.e., Us Large and Us Lg go up and down completely randomly.

Pair Corralation between Us Large and Us Lg

Assuming the 90 days horizon Us Large Pany is expected to generate 1.02 times more return on investment than Us Lg. However, Us Large is 1.02 times more volatile than Us Lg Cap. It trades about 0.18 of its potential returns per unit of risk. Us Lg Cap is currently generating about 0.18 per unit of risk. If you would invest  3,736  in Us Large Pany on September 14, 2024 and sell it today you would earn a total of  294.00  from holding Us Large Pany or generate 7.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Us Large Pany  vs.  Us Lg Cap

Us Large Pany

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Us Large Pany are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Us Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Us Lg Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Us Lg Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Us Lg may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Us Large and Us Lg

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

The idea behind Us Large Pany and Us Lg Cap 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.