Correlation Between Large Cap and The Tocqueville

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

By analyzing existing cross correlation between Large Cap Fund and The Tocqueville Fund, you can compare the effects of market volatilities on Large Cap and The Tocqueville 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 The Tocqueville. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and The Tocqueville.

Diversification Opportunities for Large Cap and The Tocqueville

0.52

Correlation Coefficient

Large Cap  The Tocqueville

Very weak diversification

The 3 months correlation between Large and The is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Fund and The Tocqueville Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Tocqueville 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 Fund are associated (or correlated) with The Tocqueville. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Tocqueville has no effect on the direction of Large Cap i.e., Large Cap and The Tocqueville go up and down completely randomly.

Pair Corralation between Large Cap and The Tocqueville

Assuming the 90 days horizon Large Cap Fund is expected to under-perform the The Tocqueville. In addition to that, Large Cap is 1.36 times more volatile than The Tocqueville Fund. It trades about -0.11 of its total potential returns per unit of risk. The Tocqueville Fund is currently generating about -0.05 per unit of volatility. If you would invest  4,647  in The Tocqueville Fund on December 19, 2024 and sell it today you would lose (161.00) from holding The Tocqueville Fund or give up 3.46% of portfolio value over 90 days.

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

Large Cap Fund  vs.  The Tocqueville Fund

Large Cap Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Large Cap Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

The Tocqueville

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Large Cap and The Tocqueville

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

The idea behind Large Cap Fund and The Tocqueville Fund 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.