Correlation Between Largecap and Paradigm Select

Can any of the company-specific risk be diversified away by investing in both Largecap and Paradigm Select 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 Paradigm Select 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 Paradigm Select Fund, you can compare the effects of market volatilities on Largecap and Paradigm Select 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 Paradigm Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Largecap and Paradigm Select.

Diversification Opportunities for Largecap and Paradigm Select

0.95

Correlation Coefficient

Largecap  Paradigm Select

Almost no diversification

The 3 months correlation between Largecap and Paradigm is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Largecap Sp 500 and Paradigm Select Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm Select 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 Paradigm Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm Select has no effect on the direction of Largecap i.e., Largecap and Paradigm Select go up and down completely randomly.

Pair Corralation between Largecap and Paradigm Select

Assuming the 90 days horizon Largecap Sp 500 is expected to generate 0.55 times more return on investment than Paradigm Select. However, Largecap Sp 500 is 1.81 times less risky than Paradigm Select. It trades about 0.31 of its potential returns per unit of risk. Paradigm Select Fund is currently generating about 0.17 per unit of risk. If you would invest  2,689  in Largecap Sp 500 on April 30, 2025 and sell it today you would earn a total of  403.00  from holding Largecap Sp 500 or generate 14.99% 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.  Paradigm Select Fund

Largecap Sp 500

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Largecap Sp 500 are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Largecap showed solid returns over the last few months and may actually be approaching a breakup point.

Paradigm Select

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paradigm Select Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Paradigm Select showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Largecap and Paradigm Select

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

The idea behind Largecap Sp 500 and Paradigm Select Fund 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.