Correlation Between Large Capitalization and Alpine Ultra

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

By analyzing existing cross correlation between Large Capitalization Growth and Alpine Ultra Short, you can compare the effects of market volatilities on Large Capitalization and Alpine Ultra 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 Capitalization with a short position of Alpine Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Capitalization and Alpine Ultra.

Diversification Opportunities for Large Capitalization and Alpine Ultra

0.5

Correlation Coefficient

Large Capitalization  Alpine Ultra

Very weak diversification

The 3 months correlation between Large and Alpine is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Large Capitalization Growth and Alpine Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpine Ultra Short and Large Capitalization 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 Capitalization Growth are associated (or correlated) with Alpine Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpine Ultra Short has no effect on the direction of Large Capitalization i.e., Large Capitalization and Alpine Ultra go up and down completely randomly.

Pair Corralation between Large Capitalization and Alpine Ultra

Assuming the 90 days horizon Large Capitalization Growth is expected to generate 15.91 times more return on investment than Alpine Ultra. However, Large Capitalization is 15.91 times more volatile than Alpine Ultra Short. It trades about 0.33 of its potential returns per unit of risk. Alpine Ultra Short is currently generating about 0.22 per unit of risk. If you would invest  478.00  in Large Capitalization Growth on April 26, 2025 and sell it today you would earn a total of  99.00  from holding Large Capitalization Growth or generate 20.71% return on investment over 90 days.

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

Large Capitalization Growth  vs.  Alpine Ultra Short

Large Capitalization

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Large Capitalization Growth are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Large Capitalization showed solid returns over the last few months and may actually be approaching a breakup point.

Alpine Ultra Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alpine Ultra Short are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Alpine Ultra 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 Capitalization and Alpine Ultra

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

The idea behind Large Capitalization Growth and Alpine Ultra Short 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.