Correlation Between Qs Moderate and Congress Large

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

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

Diversification Opportunities for Qs Moderate and Congress Large

0.97

Correlation Coefficient

Qs Moderate  Congress Large

Almost no diversification

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

Pair Corralation between Qs Moderate and Congress Large

Assuming the 90 days horizon Qs Moderate is expected to generate 1.54 times less return on investment than Congress Large. But when comparing it to its historical volatility, Qs Moderate Growth is 1.47 times less risky than Congress Large. It trades about 0.11 of its potential returns per unit of risk. Congress Large Cap is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,701  in Congress Large Cap on September 12, 2024 and sell it today you would earn a total of  1,452  from holding Congress Large Cap or generate 39.23% return on investment over 90 days.

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

Qs Moderate Growth  vs.  Congress Large Cap

Qs Moderate Growth

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qs Moderate Growth are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Qs Moderate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Congress Large Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Congress Large Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Congress Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Qs Moderate and Congress Large

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

The idea behind Qs Moderate Growth and Congress 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.