Correlation Between Large Cap and World Core

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

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

Diversification Opportunities for Large Cap and World Core

0.92

Correlation Coefficient

Large Cap  World Core

Almost no diversification

The 3 months correlation between Large and World is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap International and World Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Core Equity and Large Cap 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 Large Cap International are associated (or correlated) with World Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Core Equity has no effect on the direction of Large Cap i.e., Large Cap and World Core go up and down completely randomly.

Pair Corralation between Large Cap and World Core

Assuming the 90 days horizon Large Cap is expected to generate 1.2 times less return on investment than World Core. In addition to that, Large Cap is 1.19 times more volatile than World Core Equity. It trades about 0.15 of its total potential returns per unit of risk. World Core Equity is currently generating about 0.22 per unit of volatility. If you would invest  2,530  in World Core Equity on May 20, 2025 and sell it today you would earn a total of  214.00  from holding World Core Equity or generate 8.46% return on investment over 90 days.

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

Large Cap International  vs.  World Core Equity

Large Cap International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap International are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in September 2025.

World Core Equity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in World Core Equity are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, World Core may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Large Cap and World Core

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

The idea behind Large Cap International and World Core Equity 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.