Correlation Between Intermediate-term and Large-cap Growth

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

By analyzing existing cross correlation between Intermediate Term Tax Free Bond and Large Cap Growth Profund, you can compare the effects of market volatilities on Intermediate-term and Large-cap Growth 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 Intermediate-term with a short position of Large-cap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate-term and Large-cap Growth.

Diversification Opportunities for Intermediate-term and Large-cap Growth

0.83

Correlation Coefficient

Intermediate-term  Large-cap Growth

Very poor diversification

The 3 months correlation between Intermediate-term and Large-cap is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Tax Free Bon and Large Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Growth and Intermediate-term 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 Intermediate Term Tax Free Bond are associated (or correlated) with Large-cap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Growth has no effect on the direction of Intermediate-term i.e., Intermediate-term and Large-cap Growth go up and down completely randomly.

Pair Corralation between Intermediate-term and Large-cap Growth

Assuming the 90 days horizon Intermediate-term is expected to generate 3.75 times less return on investment than Large-cap Growth. But when comparing it to its historical volatility, Intermediate Term Tax Free Bond is 4.79 times less risky than Large-cap Growth. It trades about 0.24 of its potential returns per unit of risk. Large Cap Growth Profund is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4,903  in Large Cap Growth Profund on June 28, 2025 and sell it today you would earn a total of  427.00  from holding Large Cap Growth Profund or generate 8.71% return on investment over 90 days.

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

Intermediate Term Tax Free Bon  vs.  Large Cap Growth Profund

Intermediate Term Tax

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Term Tax Free Bond are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Intermediate-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Large Cap Growth

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap Growth Profund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Large-cap Growth may actually be approaching a critical reversion point that can send shares even higher in October 2025.

Pair Trading with Intermediate-term and Large-cap Growth

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

The idea behind Intermediate Term Tax Free Bond and Large Cap Growth Profund 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.