Correlation Between M Large and Amcap Fund

Can any of the company-specific risk be diversified away by investing in both M Large and Amcap 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 M Large and Amcap Fund 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 Amcap Fund Class, you can compare the effects of market volatilities on M Large and Amcap 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 M Large with a short position of Amcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Large and Amcap Fund.

Diversification Opportunities for M Large and Amcap Fund

0.62

Correlation Coefficient

M Large  Amcap Fund

Poor diversification

The 3 months correlation between MTCGX and Amcap is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Amcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amcap Fund Class 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 Amcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amcap Fund Class has no effect on the direction of M Large i.e., M Large and Amcap Fund go up and down completely randomly.

Pair Corralation between M Large and Amcap Fund

Assuming the 90 days horizon M Large Cap is expected to under-perform the Amcap Fund. In addition to that, M Large is 1.35 times more volatile than Amcap Fund Class. It trades about -0.1 of its total potential returns per unit of risk. Amcap Fund Class is currently generating about -0.09 per unit of volatility. If you would invest  4,601  in Amcap Fund Class on October 7, 2024 and sell it today you would lose (237.00) from holding Amcap Fund Class or give up 5.15% of portfolio value over 90 days.

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

M Large Cap  vs.  Amcap Fund Class

M Large Cap

Risk-Adjusted Performance

0 of 100

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 fairly strong technical and fundamental indicators, M Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amcap Fund Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amcap Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Amcap 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 M Large and Amcap Fund

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

The idea behind M Large Cap and Amcap Fund Class 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.