Correlation Between Qs Large and Specialized Technology

Can any of the company-specific risk be diversified away by investing in both Qs Large and Specialized Technology 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 Large and Specialized Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Qs Large and Specialized Technology

0.89

Correlation Coefficient

Qs Large  Specialized Technology

Very poor diversification

The 3 months correlation between LMUSX and Specialized is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Qs Large Cap and Specialized Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Specialized Technology and Qs 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 Qs Large Cap are associated (or correlated) with Specialized Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Specialized Technology has no effect on the direction of Qs Large i.e., Qs Large and Specialized Technology go up and down completely randomly.

Pair Corralation between Qs Large and Specialized Technology

Assuming the 90 days horizon Qs Large Cap is expected to generate 0.81 times more return on investment than Specialized Technology. However, Qs Large Cap is 1.24 times less risky than Specialized Technology. It trades about 0.11 of its potential returns per unit of risk. Specialized Technology Fund is currently generating about 0.09 per unit of risk. If you would invest  1,652  in Qs Large Cap on September 14, 2024 and sell it today you would earn a total of  981.00  from holding Qs Large Cap or generate 59.38% return on investment over 90 days.

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

Qs Large Cap  vs.  Specialized Technology Fund

Qs Large Cap

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qs Large Cap are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Qs Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Specialized Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Specialized Technology Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Specialized Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Qs Large and Specialized Technology

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

The idea behind Qs Large Cap and Specialized Technology 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.