Correlation Between Nicholas Fund and Large-cap Growth
Can any of the company-specific risk be diversified away by investing in both Nicholas Fund and Large-cap Growth 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 Nicholas Fund and Large-cap Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nicholas Fund Inc and Large Cap Growth Profund, you can compare the effects of market volatilities on Nicholas Fund and Large-cap Growth 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 Nicholas Fund with a short position of Large-cap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nicholas Fund and Large-cap Growth.
Diversification Opportunities for Nicholas Fund and Large-cap Growth
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nicholas and Large-cap is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nicholas Fund Inc and Large Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Growth and Nicholas Fund 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 Nicholas Fund Inc are associated (or correlated) with Large-cap Growth. 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 Growth has no effect on the direction of Nicholas Fund i.e., Nicholas Fund and Large-cap Growth go up and down completely randomly.
Pair Corralation between Nicholas Fund and Large-cap Growth
Assuming the 90 days horizon Nicholas Fund Inc is expected to generate 0.61 times more return on investment than Large-cap Growth. However, Nicholas Fund Inc is 1.65 times less risky than Large-cap Growth. It trades about -0.09 of its potential returns per unit of risk. Large Cap Growth Profund is currently generating about -0.11 per unit of risk. If you would invest 9,355 in Nicholas Fund Inc on December 28, 2024 and sell it today you would lose (450.00) from holding Nicholas Fund Inc or give up 4.81% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Nicholas Fund Inc vs. Large Cap Growth Profund
Performance |
Timeline |
Nicholas Fund |
Large Cap Growth |
Nicholas Fund and Large-cap Growth Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nicholas Fund and Large-cap Growth
The main advantage of trading using opposite Nicholas Fund and Large-cap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nicholas Fund position performs unexpectedly, Large-cap Growth 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 Growth will offset losses from the drop in Large-cap Growth's long position.Nicholas Fund vs. Davis Financial Fund | Nicholas Fund vs. Financials Ultrasector Profund | Nicholas Fund vs. Cref Money Market | Nicholas Fund vs. Edward Jones Money |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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