Correlation Between Polen Growth and Polen Small

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Can any of the company-specific risk be diversified away by investing in both Polen Growth and Polen Small 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 Polen Growth and Polen Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Polen Growth Fund and Polen Small, you can compare the effects of market volatilities on Polen Growth and Polen Small 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 Polen Growth with a short position of Polen Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polen Growth and Polen Small.

Diversification Opportunities for Polen Growth and Polen Small

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Polen and Polen is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Polen Growth Fund and Polen Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polen Small and Polen Growth 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 Polen Growth Fund are associated (or correlated) with Polen Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polen Small has no effect on the direction of Polen Growth i.e., Polen Growth and Polen Small go up and down completely randomly.

Pair Corralation between Polen Growth and Polen Small

Assuming the 90 days horizon Polen Growth Fund is expected to generate 0.76 times more return on investment than Polen Small. However, Polen Growth Fund is 1.31 times less risky than Polen Small. It trades about 0.31 of its potential returns per unit of risk. Polen Small is currently generating about 0.18 per unit of risk. If you would invest  4,693  in Polen Growth Fund on November 9, 2024 and sell it today you would earn a total of  241.00  from holding Polen Growth Fund or generate 5.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Polen Growth Fund  vs.  Polen Small

 Performance 
       Timeline  
Polen Growth 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Polen Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Polen Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Polen Small 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Polen Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Polen Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Polen Growth and Polen Small Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Polen Growth and Polen Small

The main advantage of trading using opposite Polen Growth and Polen Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polen Growth position performs unexpectedly, Polen Small 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 Polen Small will offset losses from the drop in Polen Small's long position.
The idea behind Polen Growth Fund and Polen Small 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.
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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