Correlation Between Edgar Lomax and Large Cap

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

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

Diversification Opportunities for Edgar Lomax and Large Cap

0.5

Correlation Coefficient

Edgar Lomax  Large Cap

Very weak diversification

The 3 months correlation between Edgar and Large is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Edgar Lomax Value and Large Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Equity and Edgar Lomax 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 Edgar Lomax Value are associated (or correlated) with Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Equity has no effect on the direction of Edgar Lomax i.e., Edgar Lomax and Large Cap go up and down completely randomly.

Pair Corralation between Edgar Lomax and Large Cap

Assuming the 90 days horizon Edgar Lomax Value is expected to generate 0.73 times more return on investment than Large Cap. However, Edgar Lomax Value is 1.37 times less risky than Large Cap. It trades about 0.14 of its potential returns per unit of risk. Large Cap Equity is currently generating about -0.02 per unit of risk. If you would invest  1,534  in Edgar Lomax Value on November 28, 2024 and sell it today you would earn a total of  23.00  from holding Edgar Lomax Value or generate 1.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Edgar Lomax Value  vs.  Large Cap Equity

Edgar Lomax Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edgar Lomax Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Edgar Lomax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Large Cap Equity

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Edgar Lomax and Large Cap

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

The idea behind Edgar Lomax Value and Large Cap Equity 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.