Correlation Between Fundamental Large and Vela Large

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Can any of the company-specific risk be diversified away by investing in both Fundamental Large and Vela 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 Fundamental Large and Vela Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fundamental Large Cap and Vela Large Cap, you can compare the effects of market volatilities on Fundamental Large and Vela 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 Fundamental Large with a short position of Vela Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundamental Large and Vela Large.

Diversification Opportunities for Fundamental Large and Vela Large

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Fundamental and Vela is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and Vela Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vela Large Cap and Fundamental 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 Fundamental Large Cap are associated (or correlated) with Vela Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vela Large Cap has no effect on the direction of Fundamental Large i.e., Fundamental Large and Vela Large go up and down completely randomly.

Pair Corralation between Fundamental Large and Vela Large

Assuming the 90 days horizon Fundamental Large Cap is expected to generate 1.48 times more return on investment than Vela Large. However, Fundamental Large is 1.48 times more volatile than Vela Large Cap. It trades about 0.12 of its potential returns per unit of risk. Vela Large Cap is currently generating about 0.1 per unit of risk. If you would invest  5,014  in Fundamental Large Cap on September 7, 2024 and sell it today you would earn a total of  3,309  from holding Fundamental Large Cap or generate 66.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Fundamental Large Cap  vs.  Vela Large Cap

 Performance 
       Timeline  
Fundamental Large Cap 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Fundamental Large Cap are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fundamental Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Vela Large Cap 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Vela Large Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vela Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fundamental Large and Vela Large Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fundamental Large and Vela Large

The main advantage of trading using opposite Fundamental Large and Vela Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundamental Large position performs unexpectedly, Vela 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 Vela Large will offset losses from the drop in Vela Large's long position.
The idea behind Fundamental Large Cap and Vela Large 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.
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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