Correlation Between M Large and Aquila Three

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

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

Diversification Opportunities for M Large and Aquila Three

-0.55

Correlation Coefficient

M Large  Aquila Three

Excellent diversification

The 3 months correlation between MTCGX and Aquila is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Aquila Three Peaks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquila Three Peaks and M 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 M Large Cap are associated (or correlated) with Aquila Three. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquila Three Peaks has no effect on the direction of M Large i.e., M Large and Aquila Three go up and down completely randomly.

Pair Corralation between M Large and Aquila Three

Assuming the 90 days horizon M Large Cap is expected to under-perform the Aquila Three. In addition to that, M Large is 8.58 times more volatile than Aquila Three Peaks. It trades about -0.07 of its total potential returns per unit of risk. Aquila Three Peaks is currently generating about 0.13 per unit of volatility. If you would invest  803.00  in Aquila Three Peaks on December 28, 2024 and sell it today you would earn a total of  12.00  from holding Aquila Three Peaks or generate 1.49% return on investment over 90 days.

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

M Large Cap  vs.  Aquila Three Peaks

M Large Cap

Risk-Adjusted Performance

Very Weak

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

Aquila Three Peaks

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aquila Three Peaks are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aquila Three is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with M Large and Aquila Three

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

The idea behind M Large Cap and Aquila Three Peaks 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.