Correlation Between First Asset and Mackenzie Large

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

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

Diversification Opportunities for First Asset and Mackenzie Large

0.98

Correlation Coefficient

First Asset  Mackenzie Large

Almost no diversification

The 3 months correlation between First and Mackenzie is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding First Asset Morningstar and Mackenzie Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie Large Cap and First Asset 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 First Asset Morningstar are associated (or correlated) with Mackenzie Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie Large Cap has no effect on the direction of First Asset i.e., First Asset and Mackenzie Large go up and down completely randomly.

Pair Corralation between First Asset and Mackenzie Large

Assuming the 90 days trading horizon First Asset Morningstar is expected to generate 0.93 times more return on investment than Mackenzie Large. However, First Asset Morningstar is 1.08 times less risky than Mackenzie Large. It trades about 0.33 of its potential returns per unit of risk. Mackenzie Large Cap is currently generating about 0.3 per unit of risk. If you would invest  2,836  in First Asset Morningstar on September 4, 2024 and sell it today you would earn a total of  443.00  from holding First Asset Morningstar or generate 15.62% return on investment over 90 days.

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

First Asset Morningstar  vs.  Mackenzie Large Cap

First Asset Morningstar

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First Asset Morningstar are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, First Asset displayed solid returns over the last few months and may actually be approaching a breakup point.

Mackenzie Large Cap

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mackenzie Large Cap are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Mackenzie Large displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Asset and Mackenzie Large

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

The idea behind First Asset Morningstar and Mackenzie 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.