Correlation Between Lgm Risk and Large Cap

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

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

Diversification Opportunities for Lgm Risk and Large Cap

0.93

Correlation Coefficient

Lgm Risk  Large Cap

Almost no diversification

The 3 months correlation between Lgm and Large is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Lgm Risk Managed 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 Lgm Risk 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 Lgm Risk Managed 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 Growth has no effect on the direction of Lgm Risk i.e., Lgm Risk and Large Cap go up and down completely randomly.

Pair Corralation between Lgm Risk and Large Cap

Assuming the 90 days horizon Lgm Risk is expected to generate 2.21 times less return on investment than Large Cap. But when comparing it to its historical volatility, Lgm Risk Managed is 2.89 times less risky than Large Cap. It trades about 0.16 of its potential returns per unit of risk. Large Cap Growth Profund is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,177  in Large Cap Growth Profund on September 26, 2024 and sell it today you would earn a total of  1,483  from holding Large Cap Growth Profund or generate 46.68% return on investment over 90 days.

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

Lgm Risk Managed  vs.  Large Cap Growth Profund

Lgm Risk Managed

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lgm Risk Managed are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Lgm Risk is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Large Cap Growth

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap Growth Profund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lgm Risk and Large Cap

The main advantage of trading using opposite Lgm Risk and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lgm Risk 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 Lgm Risk Managed and Large Cap Growth Profund 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.