Correlation Between Fulcrum Diversified and Applied Finance
Can any of the company-specific risk be diversified away by investing in both Fulcrum Diversified and Applied Finance 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 Fulcrum Diversified and Applied Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fulcrum Diversified Absolute and Applied Finance Explorer, you can compare the effects of market volatilities on Fulcrum Diversified and Applied Finance 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 Fulcrum Diversified with a short position of Applied Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fulcrum Diversified and Applied Finance.
Diversification Opportunities for Fulcrum Diversified and Applied Finance
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fulcrum and Applied is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Fulcrum Diversified Absolute and Applied Finance Explorer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Finance Explorer and Fulcrum Diversified 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 Fulcrum Diversified Absolute are associated (or correlated) with Applied Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Finance Explorer has no effect on the direction of Fulcrum Diversified i.e., Fulcrum Diversified and Applied Finance go up and down completely randomly.
Pair Corralation between Fulcrum Diversified and Applied Finance
Assuming the 90 days horizon Fulcrum Diversified Absolute is expected to under-perform the Applied Finance. In addition to that, Fulcrum Diversified is 1.19 times more volatile than Applied Finance Explorer. It trades about -0.17 of its total potential returns per unit of risk. Applied Finance Explorer is currently generating about -0.17 per unit of volatility. If you would invest 2,465 in Applied Finance Explorer on September 12, 2024 and sell it today you would lose (77.00) from holding Applied Finance Explorer or give up 3.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Fulcrum Diversified Absolute vs. Applied Finance Explorer
Performance |
| Timeline |
| Fulcrum Diversified |
| Applied Finance Explorer |
Fulcrum Diversified and Applied Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fulcrum Diversified and Applied Finance
The main advantage of trading using opposite Fulcrum Diversified and Applied Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fulcrum Diversified position performs unexpectedly, Applied Finance 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 Applied Finance will offset losses from the drop in Applied Finance's long position.The idea behind Fulcrum Diversified Absolute and Applied Finance Explorer 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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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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