Correlation Between Large Cap and Laudus Large
Can any of the company-specific risk be diversified away by investing in both Large Cap and Laudus Large 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 Laudus Large 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 Laudus Large Cap, you can compare the effects of market volatilities on Large Cap and Laudus Large 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 Laudus Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Laudus Large.
Diversification Opportunities for Large Cap and Laudus Large
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Large and Laudus is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap E and Laudus Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laudus Large Cap 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 Laudus Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laudus Large Cap has no effect on the direction of Large Cap i.e., Large Cap and Laudus Large go up and down completely randomly.
Pair Corralation between Large Cap and Laudus Large
Assuming the 90 days horizon Large Cap is expected to generate 1.72 times less return on investment than Laudus Large. But when comparing it to its historical volatility, Large Cap E is 1.31 times less risky than Laudus Large. It trades about 0.22 of its potential returns per unit of risk. Laudus Large Cap is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 2,440 in Laudus Large Cap on September 6, 2024 and sell it today you would earn a total of 444.00 from holding Laudus Large Cap or generate 18.2% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 98.44% |
Values | Daily Returns |
Large Cap E vs. Laudus Large Cap
Performance |
Timeline |
Large Cap E |
Laudus Large Cap |
Large Cap and Laudus Large Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Large Cap and Laudus Large
The main advantage of trading using opposite Large Cap and Laudus Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap position performs unexpectedly, Laudus Large 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 Laudus Large will offset losses from the drop in Laudus Large's long position.Large Cap vs. Legg Mason Partners | Large Cap vs. Templeton Emerging Markets | Large Cap vs. Jpmorgan Emerging Markets | Large Cap vs. Dodge Cox Emerging |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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