Correlation Between Large Cap and Aston/crosswind Small

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

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

Diversification Opportunities for Large Cap and Aston/crosswind Small

0.91

Correlation Coefficient

Large Cap  Aston/crosswind Small

Almost no diversification

The 3 months correlation between Large and Aston/crosswind is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth and Astoncrosswind Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astoncrosswind Small Cap and Large Cap 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 Cap Growth are associated (or correlated) with Aston/crosswind Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astoncrosswind Small Cap has no effect on the direction of Large Cap i.e., Large Cap and Aston/crosswind Small go up and down completely randomly.

Pair Corralation between Large Cap and Aston/crosswind Small

Assuming the 90 days horizon Large Cap is expected to generate 1.11 times less return on investment than Aston/crosswind Small. But when comparing it to its historical volatility, Large Cap Growth is 1.2 times less risky than Aston/crosswind Small. It trades about 0.18 of its potential returns per unit of risk. Astoncrosswind Small Cap is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,681  in Astoncrosswind Small Cap on August 31, 2024 and sell it today you would earn a total of  189.00  from holding Astoncrosswind Small Cap or generate 11.24% return on investment over 90 days.

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

Large Cap Growth  vs.  Astoncrosswind Small Cap

Large Cap Growth

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap Growth are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Astoncrosswind Small Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Astoncrosswind Small Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Aston/crosswind Small may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Large Cap and Aston/crosswind Small

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

The idea behind Large Cap Growth and Astoncrosswind Small 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.