Correlation Between Large Cap and Nicholas Fund

Can any of the company-specific risk be diversified away by investing in both Large Cap and Nicholas 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 Nicholas 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 Profund and Nicholas Fund Inc, you can compare the effects of market volatilities on Large Cap and Nicholas 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 Nicholas Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Nicholas Fund.

Diversification Opportunities for Large Cap and Nicholas Fund

0.95

Correlation Coefficient

Large Cap  Nicholas Fund

Almost no diversification

The 3 months correlation between Large and Nicholas is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth Profund and Nicholas Fund Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nicholas 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 Profund are associated (or correlated) with Nicholas Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nicholas Fund has no effect on the direction of Large Cap i.e., Large Cap and Nicholas Fund go up and down completely randomly.

Pair Corralation between Large Cap and Nicholas Fund

Assuming the 90 days horizon Large Cap Growth Profund is expected to generate 1.29 times more return on investment than Nicholas Fund. However, Large Cap is 1.29 times more volatile than Nicholas Fund Inc. It trades about 0.19 of its potential returns per unit of risk. Nicholas Fund Inc is currently generating about 0.13 per unit of risk. If you would invest  4,187  in Large Cap Growth Profund on September 17, 2024 and sell it today you would earn a total of  491.00  from holding Large Cap Growth Profund or generate 11.73% return on investment over 90 days.

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

Large Cap Growth Profund  vs.  Nicholas Fund Inc

Large Cap Growth

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap Growth Profund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nicholas Fund

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nicholas Fund Inc are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nicholas 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 Nicholas Fund

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

The idea behind Large Cap Growth Profund and Nicholas Fund Inc 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.