Correlation Between Intech Managed and Large Cap

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

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

Diversification Opportunities for Intech Managed and Large Cap

0.94

Correlation Coefficient

Intech Managed  Large Cap

Almost no diversification

The 3 months correlation between Intech and Large is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Intech Managed Volatility and Large Cap E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap E and Intech Managed 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 Intech Managed Volatility are associated (or correlated) with Large Cap. 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 E has no effect on the direction of Intech Managed i.e., Intech Managed and Large Cap go up and down completely randomly.

Pair Corralation between Intech Managed and Large Cap

Assuming the 90 days horizon Intech Managed is expected to generate 1.05 times less return on investment than Large Cap. But when comparing it to its historical volatility, Intech Managed Volatility is 1.05 times less risky than Large Cap. It trades about 0.1 of its potential returns per unit of risk. Large Cap E is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,073  in Large Cap E on September 12, 2024 and sell it today you would earn a total of  555.00  from holding Large Cap E or generate 26.77% return on investment over 90 days.

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

Intech Managed Volatility  vs.  Large Cap E

Intech Managed Volatility

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intech Managed Volatility are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Intech Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Large Cap E

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap E are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Intech Managed and Large Cap

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

The idea behind Intech Managed Volatility and Large Cap E 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.