Correlation Between Laudus Us and Auer Growth

Can any of the company-specific risk be diversified away by investing in both Laudus Us and Auer Growth 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 Laudus Us and Auer Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Laudus Us and Auer Growth

0.82

Correlation Coefficient

Laudus Us  Auer Growth

Very poor diversification

The 3 months correlation between Laudus and Auer is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Laudus Large Cap and Auer Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auer Growth Fund and Laudus Us 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 Laudus Large Cap are associated (or correlated) with Auer Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auer Growth Fund has no effect on the direction of Laudus Us i.e., Laudus Us and Auer Growth go up and down completely randomly.

Pair Corralation between Laudus Us and Auer Growth

Assuming the 90 days horizon Laudus Large Cap is expected to generate 0.57 times more return on investment than Auer Growth. However, Laudus Large Cap is 1.75 times less risky than Auer Growth. It trades about -0.1 of its potential returns per unit of risk. Auer Growth Fund is currently generating about -0.18 per unit of risk. If you would invest  2,824  in Laudus Large Cap on December 1, 2024 and sell it today you would lose (272.00) from holding Laudus Large Cap or give up 9.63% of portfolio value over 90 days.

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

Laudus Large Cap  vs.  Auer Growth Fund

Laudus Large Cap

Risk-Adjusted Performance

Very Weak

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

Auer Growth Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Auer Growth Fund 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 basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Laudus Us and Auer Growth

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

The idea behind Laudus Large Cap and Auer Growth 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.