Correlation Between Qs Small and Congress Large
Can any of the company-specific risk be diversified away by investing in both Qs Small and Congress 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 Qs Small and Congress Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Qs Small Capitalization and Congress Large Cap, you can compare the effects of market volatilities on Qs Small and Congress 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 Qs Small with a short position of Congress Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qs Small and Congress Large.
Diversification Opportunities for Qs Small and Congress Large
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between LMBMX and Congress is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Qs Small Capitalization and Congress Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Congress Large Cap and Qs Small 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 Qs Small Capitalization are associated (or correlated) with Congress Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Congress Large Cap has no effect on the direction of Qs Small i.e., Qs Small and Congress Large go up and down completely randomly.
Pair Corralation between Qs Small and Congress Large
Assuming the 90 days horizon Qs Small is expected to generate 1.11 times less return on investment than Congress Large. In addition to that, Qs Small is 1.38 times more volatile than Congress Large Cap. It trades about 0.08 of its total potential returns per unit of risk. Congress Large Cap is currently generating about 0.12 per unit of volatility. If you would invest 4,113 in Congress Large Cap on September 8, 2024 and sell it today you would earn a total of 1,091 from holding Congress Large Cap or generate 26.53% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Qs Small Capitalization vs. Congress Large Cap
Performance |
Timeline |
Qs Small Capitalization |
Congress Large Cap |
Qs Small and Congress Large Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Qs Small and Congress Large
The main advantage of trading using opposite Qs Small and Congress Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qs Small position performs unexpectedly, Congress 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 Congress Large will offset losses from the drop in Congress Large's long position.Qs Small vs. Clearbridge Aggressive Growth | Qs Small vs. Clearbridge Small Cap | Qs Small vs. Qs International Equity | Qs Small vs. Clearbridge Appreciation Fund |
Congress Large vs. Goldman Sachs Large | Congress Large vs. Old Westbury Large | Congress Large vs. Alternative Asset Allocation | Congress Large vs. Tax Managed Large Cap |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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