Correlation Between Kensington Active and All Asset
Can any of the company-specific risk be diversified away by investing in both Kensington Active and All Asset 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 Kensington Active and All Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kensington Active Advantage and All Asset Fund, you can compare the effects of market volatilities on Kensington Active and All Asset 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 Kensington Active with a short position of All Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kensington Active and All Asset.
Diversification Opportunities for Kensington Active and All Asset
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Kensington and All is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Kensington Active Advantage and All Asset Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All Asset Fund and Kensington Active 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 Kensington Active Advantage are associated (or correlated) with All Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All Asset Fund has no effect on the direction of Kensington Active i.e., Kensington Active and All Asset go up and down completely randomly.
Pair Corralation between Kensington Active and All Asset
Assuming the 90 days horizon Kensington Active Advantage is expected to generate 0.91 times more return on investment than All Asset. However, Kensington Active Advantage is 1.1 times less risky than All Asset. It trades about 0.38 of its potential returns per unit of risk. All Asset Fund is currently generating about 0.21 per unit of risk. If you would invest 994.00 in Kensington Active Advantage on September 1, 2024 and sell it today you would earn a total of 34.00 from holding Kensington Active Advantage or generate 3.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Kensington Active Advantage vs. All Asset Fund
Performance |
| Timeline |
| Kensington Active |
| All Asset Fund |
Kensington Active and All Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kensington Active and All Asset
The main advantage of trading using opposite Kensington Active and All Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kensington Active position performs unexpectedly, All Asset 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 All Asset will offset losses from the drop in All Asset's long position.The idea behind Kensington Active Advantage and All Asset Fund 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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