Correlation Between The Jensen and Sound Shore
Can any of the company-specific risk be diversified away by investing in both The Jensen and Sound Shore 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 The Jensen and Sound Shore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Jensen Portfolio and Sound Shore Fund, you can compare the effects of market volatilities on The Jensen and Sound Shore 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 The Jensen with a short position of Sound Shore. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Jensen and Sound Shore.
Diversification Opportunities for The Jensen and Sound Shore
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between The and Sound is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding The Jensen Portfolio and Sound Shore Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Shore Fund and The Jensen 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 The Jensen Portfolio are associated (or correlated) with Sound Shore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Shore Fund has no effect on the direction of The Jensen i.e., The Jensen and Sound Shore go up and down completely randomly.
Pair Corralation between The Jensen and Sound Shore
Assuming the 90 days horizon The Jensen Portfolio is expected to generate 0.54 times more return on investment than Sound Shore. However, The Jensen Portfolio is 1.86 times less risky than Sound Shore. It trades about -0.09 of its potential returns per unit of risk. Sound Shore Fund is currently generating about -0.09 per unit of risk. If you would invest 6,522 in The Jensen Portfolio on October 25, 2024 and sell it today you would lose (548.00) from holding The Jensen Portfolio or give up 8.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.33% |
| Values | Daily Returns |
The Jensen Portfolio vs. Sound Shore Fund
Performance |
| Timeline |
| Jensen Portfolio |
| Sound Shore Fund |
The Jensen and Sound Shore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The Jensen and Sound Shore
The main advantage of trading using opposite The Jensen and Sound Shore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Jensen position performs unexpectedly, Sound Shore 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 Sound Shore will offset losses from the drop in Sound Shore's long position.| The Jensen vs. Clipper Fund Inc | The Jensen vs. Parnassus E Equity | The Jensen vs. Mairs Power Growth | The Jensen vs. Sound Shore Fund |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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