Correlation Between Total Return and Sound Shore
Can any of the company-specific risk be diversified away by investing in both Total Return 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 Total Return and Sound Shore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Return Fund and Sound Shore Fund, you can compare the effects of market volatilities on Total Return 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 Total Return with a short position of Sound Shore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Return and Sound Shore.
Diversification Opportunities for Total Return and Sound Shore
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Total and Sound is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Fund 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 Total Return 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 Total Return Fund 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 Total Return i.e., Total Return and Sound Shore go up and down completely randomly.
Pair Corralation between Total Return and Sound Shore
Assuming the 90 days horizon Total Return is expected to generate 2.84 times less return on investment than Sound Shore. But when comparing it to its historical volatility, Total Return Fund is 2.48 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 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,515 in Sound Shore Fund on August 26, 2024 and sell it today you would earn a total of 472.00 from holding Sound Shore Fund or generate 10.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Total Return Fund vs. Sound Shore Fund
Performance |
| Timeline |
| Total Return |
| Sound Shore Fund |
Total Return and Sound Shore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Return and Sound Shore
The main advantage of trading using opposite Total Return and Sound Shore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Return 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.| Total Return vs. Pender Real Estate | Total Return vs. Real Estate Fund | Total Return vs. Great West Real Estate | Total Return vs. Us Real Estate |
| Sound Shore vs. Hartford Schroders Smallmid | Sound Shore vs. Hartford Schroders Smallmid | Sound Shore vs. Praxis Growth Index | Sound Shore vs. Ab E Opportunities |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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