Correlation Between Moderate Strategy and M Large

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

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

Diversification Opportunities for Moderate Strategy and M Large

0.96

Correlation Coefficient

Moderate Strategy  M Large

Almost no diversification

The 3 months correlation between Moderate and MTCGX is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Moderate Strategy Fund and M Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Large Cap and Moderate Strategy 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 Moderate Strategy Fund are associated (or correlated) with M Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Large Cap has no effect on the direction of Moderate Strategy i.e., Moderate Strategy and M Large go up and down completely randomly.

Pair Corralation between Moderate Strategy and M Large

Assuming the 90 days horizon Moderate Strategy is expected to generate 2.12 times less return on investment than M Large. But when comparing it to its historical volatility, Moderate Strategy Fund is 2.57 times less risky than M Large. It trades about 0.21 of its potential returns per unit of risk. M Large Cap is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,401  in M Large Cap on May 19, 2025 and sell it today you would earn a total of  325.00  from holding M Large Cap or generate 9.56% return on investment over 90 days.

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

Moderate Strategy Fund  vs.  M Large Cap

Moderate Strategy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Moderate Strategy Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Moderate Strategy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

M Large Cap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in M Large Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, M Large may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Moderate Strategy and M Large

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

The idea behind Moderate Strategy Fund and M 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..