Correlation Between Barings Us and Balanced Strategy
Can any of the company-specific risk be diversified away by investing in both Barings Us and Balanced Strategy 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 Barings Us and Balanced Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barings High Yield and Balanced Strategy Fund, you can compare the effects of market volatilities on Barings Us and Balanced Strategy 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 Barings Us with a short position of Balanced Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings Us and Balanced Strategy.
Diversification Opportunities for Barings Us and Balanced Strategy
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Barings and Balanced is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Barings High Yield and Balanced Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Strategy and Barings Us 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 Barings High Yield are associated (or correlated) with Balanced Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Strategy has no effect on the direction of Barings Us i.e., Barings Us and Balanced Strategy go up and down completely randomly.
Pair Corralation between Barings Us and Balanced Strategy
Assuming the 90 days horizon Barings Us is expected to generate 3.84 times less return on investment than Balanced Strategy. But when comparing it to its historical volatility, Barings High Yield is 3.28 times less risky than Balanced Strategy. It trades about 0.18 of its potential returns per unit of risk. Balanced Strategy Fund is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,097 in Balanced Strategy Fund on November 3, 2024 and sell it today you would earn a total of 26.00 from holding Balanced Strategy Fund or generate 2.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barings High Yield vs. Balanced Strategy Fund
Performance |
| Timeline |
| Barings High Yield |
| Balanced Strategy |
Barings Us and Balanced Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barings Us and Balanced Strategy
The main advantage of trading using opposite Barings Us and Balanced Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings Us position performs unexpectedly, Balanced Strategy 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 Balanced Strategy will offset losses from the drop in Balanced Strategy's long position.| Barings Us vs. Glg Intl Small | Barings Us vs. Gmo Quality Fund | Barings Us vs. Commonwealth Global Fund | Barings Us vs. Barings Active Short |
| Balanced Strategy vs. Franklin Gold Precious | Balanced Strategy vs. Great West Goldman Sachs | Balanced Strategy vs. Europac Gold Fund | Balanced Strategy vs. Sprott Gold Equity |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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