Correlation Between Large Cap and James Balanced

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

By analyzing existing cross correlation between Large Cap Fund and James Balanced Golden, you can compare the effects of market volatilities on Large Cap and James Balanced 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 James Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and James Balanced.

Diversification Opportunities for Large Cap and James Balanced

0.95

Correlation Coefficient

Large Cap  James Balanced

Almost no diversification

The 3 months correlation between Large and James is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Fund and James Balanced Golden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Balanced Golden 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 Fund are associated (or correlated) with James Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Balanced Golden has no effect on the direction of Large Cap i.e., Large Cap and James Balanced go up and down completely randomly.

Pair Corralation between Large Cap and James Balanced

Assuming the 90 days horizon Large Cap Fund is expected to generate 1.69 times more return on investment than James Balanced. However, Large Cap is 1.69 times more volatile than James Balanced Golden. It trades about 0.04 of its potential returns per unit of risk. James Balanced Golden is currently generating about 0.01 per unit of risk. If you would invest  1,722  in Large Cap Fund on August 13, 2024 and sell it today you would earn a total of  11.00  from holding Large Cap Fund or generate 0.64% 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 Fund  vs.  James Balanced Golden

Large Cap Fund

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in December 2024.

James Balanced Golden

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in James Balanced Golden are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, James Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Large Cap and James Balanced

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

The idea behind Large Cap Fund and James Balanced Golden 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.