Correlation Between Rational Defensive and Catalyst Hedged
Can any of the company-specific risk be diversified away by investing in both Rational Defensive and Catalyst Hedged 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 Rational Defensive and Catalyst Hedged into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rational Defensive Growth and Catalyst Hedged Modity, you can compare the effects of market volatilities on Rational Defensive and Catalyst Hedged 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 Rational Defensive with a short position of Catalyst Hedged. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Defensive and Catalyst Hedged.
Diversification Opportunities for Rational Defensive and Catalyst Hedged
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rational and CATALYST is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Catalyst Hedged Modity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Hedged Modity and Rational Defensive 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 Rational Defensive Growth are associated (or correlated) with Catalyst Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Hedged Modity has no effect on the direction of Rational Defensive i.e., Rational Defensive and Catalyst Hedged go up and down completely randomly.
Pair Corralation between Rational Defensive and Catalyst Hedged
Assuming the 90 days horizon Rational Defensive Growth is expected to generate 1.07 times more return on investment than Catalyst Hedged. However, Rational Defensive is 1.07 times more volatile than Catalyst Hedged Modity. It trades about 0.38 of its potential returns per unit of risk. Catalyst Hedged Modity is currently generating about 0.1 per unit of risk. If you would invest 3,779 in Rational Defensive Growth on September 2, 2024 and sell it today you would earn a total of 263.00 from holding Rational Defensive Growth or generate 6.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rational Defensive Growth vs. Catalyst Hedged Modity
Performance |
| Timeline |
| Rational Defensive Growth |
| Catalyst Hedged Modity |
Rational Defensive and Catalyst Hedged Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rational Defensive and Catalyst Hedged
The main advantage of trading using opposite Rational Defensive and Catalyst Hedged positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Defensive position performs unexpectedly, Catalyst Hedged 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 Catalyst Hedged will offset losses from the drop in Catalyst Hedged's long position.| Rational Defensive vs. Tax Managed Large Cap | Rational Defensive vs. Transamerica Large Cap | Rational Defensive vs. Fidelity Series 1000 | Rational Defensive vs. Fundamental Large Cap |
| Catalyst Hedged vs. Kinetics Small Cap | Catalyst Hedged vs. Small Pany Growth | Catalyst Hedged vs. Champlain Mid Cap | Catalyst Hedged vs. Rational Defensive Growth |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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