Correlation Between Large Capital and Growth Fund

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

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

Diversification Opportunities for Large Capital and Growth Fund

0.75

Correlation Coefficient

Large Capital  Growth Fund

Poor diversification

The 3 months correlation between Large and Growth is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Large Capital Growth and Growth Fund Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund Growth and Large Capital 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 Large Capital Growth are associated (or correlated) with Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund Growth has no effect on the direction of Large Capital i.e., Large Capital and Growth Fund go up and down completely randomly.

Pair Corralation between Large Capital and Growth Fund

Assuming the 90 days horizon Large Capital Growth is expected to under-perform the Growth Fund. In addition to that, Large Capital is 1.72 times more volatile than Growth Fund Growth. It trades about -0.15 of its total potential returns per unit of risk. Growth Fund Growth is currently generating about -0.13 per unit of volatility. If you would invest  1,760  in Growth Fund Growth on December 29, 2024 and sell it today you would lose (251.00) from holding Growth Fund Growth or give up 14.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Large Capital Growth  vs.  Growth Fund Growth

Large Capital Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Large Capital Growth 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.

Growth Fund Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Growth Fund Growth 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 essential 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.

Pair Trading with Large Capital and Growth Fund

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

The idea behind Large Capital Growth and Growth Fund Growth 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.