Correlation Between Large Cap and International Fund

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

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

Diversification Opportunities for Large Cap and International Fund

0.54

Correlation Coefficient

Large Cap  International Fund

Very weak diversification

The 3 months correlation between Large and International is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth and International Fund Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Fund 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 Growth are associated (or correlated) with International Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Fund has no effect on the direction of Large Cap i.e., Large Cap and International Fund go up and down completely randomly.

Pair Corralation between Large Cap and International Fund

Assuming the 90 days horizon Large Cap Growth is expected to under-perform the International Fund. In addition to that, Large Cap is 3.68 times more volatile than International Fund International. It trades about -0.05 of its total potential returns per unit of risk. International Fund International is currently generating about 0.04 per unit of volatility. If you would invest  3,541  in International Fund International on September 27, 2024 and sell it today you would earn a total of  117.00  from holding International Fund International or generate 3.3% return on investment over 90 days.

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

Large Cap Growth  vs.  International Fund Internation

Large Cap Growth

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

International Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Fund International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, International Fund 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 International Fund

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

The idea behind Large Cap Growth and International Fund International 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.