Correlation Between Largecap and Dana Large

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

By analyzing existing cross correlation between Largecap Sp 500 and Dana Large Cap, you can compare the effects of market volatilities on Largecap and Dana 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 Largecap with a short position of Dana Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Largecap and Dana Large.

Diversification Opportunities for Largecap and Dana Large

0.99

Correlation Coefficient

Largecap  Dana Large

No risk reduction

The 3 months correlation between Largecap and Dana is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Largecap Sp 500 and Dana Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana Large Cap and Largecap 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 Largecap Sp 500 are associated (or correlated) with Dana Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Large Cap has no effect on the direction of Largecap i.e., Largecap and Dana Large go up and down completely randomly.

Pair Corralation between Largecap and Dana Large

Assuming the 90 days horizon Largecap Sp 500 is expected to generate 0.94 times more return on investment than Dana Large. However, Largecap Sp 500 is 1.07 times less risky than Dana Large. It trades about 0.07 of its potential returns per unit of risk. Dana Large Cap is currently generating about 0.06 per unit of risk. If you would invest  2,811  in Largecap Sp 500 on September 20, 2024 and sell it today you would earn a total of  92.00  from holding Largecap Sp 500 or generate 3.27% return on investment over 90 days.

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

Largecap Sp 500  vs.  Dana Large Cap

Largecap Sp 500

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Largecap Sp 500 are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Largecap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dana Large Cap

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Largecap and Dana Large

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

The idea behind Largecap Sp 500 and Dana 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..