Correlation Between M Large and Real Assets

Can any of the company-specific risk be diversified away by investing in both M Large and Real Assets 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 Real Assets 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 Real Assets Portfolio, you can compare the effects of market volatilities on M Large and Real Assets 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 Real Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Large and Real Assets.

Diversification Opportunities for M Large and Real Assets

-0.56

Correlation Coefficient

M Large  Real Assets

Excellent diversification

The 3 months correlation between MTCGX and Real is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Real Assets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Assets Portfolio 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 Real Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Assets Portfolio has no effect on the direction of M Large i.e., M Large and Real Assets go up and down completely randomly.

Pair Corralation between M Large and Real Assets

Assuming the 90 days horizon M Large Cap is expected to under-perform the Real Assets. In addition to that, M Large is 5.63 times more volatile than Real Assets Portfolio. It trades about -0.12 of its total potential returns per unit of risk. Real Assets Portfolio is currently generating about 0.38 per unit of volatility. If you would invest  975.00  in Real Assets Portfolio on December 20, 2024 and sell it today you would earn a total of  84.00  from holding Real Assets Portfolio or generate 8.62% 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.  Real Assets Portfolio

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 weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Real Assets Portfolio

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Real Assets Portfolio are ranked lower than 30 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Real Assets may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with M Large and Real Assets

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

The idea behind M Large Cap and Real Assets Portfolio 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.