Correlation Between Arc Funds and Sandon Capital
Can any of the company-specific risk be diversified away by investing in both Arc Funds and Sandon Capital 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 Arc Funds and Sandon Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arc Funds and Sandon Capital Investments, you can compare the effects of market volatilities on Arc Funds and Sandon Capital 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 Arc Funds with a short position of Sandon Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arc Funds and Sandon Capital.
Diversification Opportunities for Arc Funds and Sandon Capital
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Arc and Sandon is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Arc Funds and Sandon Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandon Capital Inves and Arc Funds 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 Arc Funds are associated (or correlated) with Sandon Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandon Capital Inves has no effect on the direction of Arc Funds i.e., Arc Funds and Sandon Capital go up and down completely randomly.
Pair Corralation between Arc Funds and Sandon Capital
Assuming the 90 days trading horizon Arc Funds is expected to generate 2.75 times more return on investment than Sandon Capital. However, Arc Funds is 2.75 times more volatile than Sandon Capital Investments. It trades about 0.41 of its potential returns per unit of risk. Sandon Capital Investments is currently generating about 0.18 per unit of risk. If you would invest 8.70 in Arc Funds on October 25, 2024 and sell it today you would earn a total of 2.30 from holding Arc Funds or generate 26.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arc Funds vs. Sandon Capital Investments
Performance |
| Timeline |
| Arc Funds |
| Sandon Capital Inves |
Arc Funds and Sandon Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arc Funds and Sandon Capital
The main advantage of trading using opposite Arc Funds and Sandon Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arc Funds position performs unexpectedly, Sandon Capital 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 Sandon Capital will offset losses from the drop in Sandon Capital's long position.| Arc Funds vs. PVW Resources | Arc Funds vs. Woolworths | Arc Funds vs. Wesfarmers | Arc Funds vs. Coles Group |
| Sandon Capital vs. EROAD | Sandon Capital vs. Computershare | Sandon Capital vs. Nine Entertainment Co | Sandon Capital vs. Duxton Broadacre Farms |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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