Correlation Between Pace Large and Fundamental Large

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

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

Diversification Opportunities for Pace Large and Fundamental Large

0.97

Correlation Coefficient

Pace Large  Fundamental Large

Almost no diversification

The 3 months correlation between Pace and Fundamental is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Pace Large Growth and Fundamental Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Large Cap and Pace 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 Pace Large Growth are associated (or correlated) with Fundamental Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Large Cap has no effect on the direction of Pace Large i.e., Pace Large and Fundamental Large go up and down completely randomly.

Pair Corralation between Pace Large and Fundamental Large

Assuming the 90 days horizon Pace Large Growth is expected to under-perform the Fundamental Large. In addition to that, Pace Large is 1.16 times more volatile than Fundamental Large Cap. It trades about -0.1 of its total potential returns per unit of risk. Fundamental Large Cap is currently generating about -0.1 per unit of volatility. If you would invest  6,709  in Fundamental Large Cap on December 30, 2024 and sell it today you would lose (455.00) from holding Fundamental Large Cap or give up 6.78% of portfolio value over 90 days.

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

Pace Large Growth  vs.  Fundamental Large Cap

Pace Large Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pace Large Growth 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.

Fundamental Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fundamental Large Cap 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 Pace Large and Fundamental Large

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

The idea behind Pace Large Growth and Fundamental Large Cap 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.