Correlation Between Large Cap and Janus Forty

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

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

Diversification Opportunities for Large Cap and Janus Forty

0.86

Correlation Coefficient

Large Cap  Janus Forty

Very poor diversification

The 3 months correlation between Large and Janus is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap E and Janus Forty Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Janus Forty 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 E are associated (or correlated) with Janus Forty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Janus Forty Fund has no effect on the direction of Large Cap i.e., Large Cap and Janus Forty go up and down completely randomly.

Pair Corralation between Large Cap and Janus Forty

Assuming the 90 days horizon Large Cap E is expected to generate 0.49 times more return on investment than Janus Forty. However, Large Cap E is 2.03 times less risky than Janus Forty. It trades about 0.22 of its potential returns per unit of risk. Janus Forty Fund is currently generating about 0.03 per unit of risk. If you would invest  2,400  in Large Cap E on September 10, 2024 and sell it today you would earn a total of  250.00  from holding Large Cap E or generate 10.42% return on investment over 90 days.

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

Large Cap E  vs.  Janus Forty Fund

Large Cap E

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap E are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Janus Forty Fund

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Janus Forty Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Janus Forty 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 Janus Forty

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

The idea behind Large Cap E and Janus Forty 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.