Correlation Between Balanced Strategy and Moderate Strategy
Can any of the company-specific risk be diversified away by investing in both Balanced Strategy and Moderate Strategy 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 Balanced Strategy and Moderate Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Strategy Fund and Moderate Strategy Fund, you can compare the effects of market volatilities on Balanced Strategy and Moderate Strategy 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 Balanced Strategy with a short position of Moderate Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Strategy and Moderate Strategy.
Diversification Opportunities for Balanced Strategy and Moderate Strategy
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Balanced and Moderate is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy Fund and Moderate Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderate Strategy and Balanced Strategy 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 Balanced Strategy Fund are associated (or correlated) with Moderate Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderate Strategy has no effect on the direction of Balanced Strategy i.e., Balanced Strategy and Moderate Strategy go up and down completely randomly.
Pair Corralation between Balanced Strategy and Moderate Strategy
Assuming the 90 days horizon Balanced Strategy Fund is expected to generate 1.2 times more return on investment than Moderate Strategy. However, Balanced Strategy is 1.2 times more volatile than Moderate Strategy Fund. It trades about 0.01 of its potential returns per unit of risk. Moderate Strategy Fund is currently generating about -0.04 per unit of risk. If you would invest 1,098 in Balanced Strategy Fund on August 28, 2024 and sell it today you would earn a total of 2.00 from holding Balanced Strategy Fund or generate 0.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Strategy Fund vs. Moderate Strategy Fund
Performance |
| Timeline |
| Balanced Strategy |
| Moderate Strategy |
Balanced Strategy and Moderate Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Strategy and Moderate Strategy
The main advantage of trading using opposite Balanced Strategy and Moderate Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Strategy position performs unexpectedly, Moderate Strategy 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 Moderate Strategy will offset losses from the drop in Moderate Strategy's long position.| Balanced Strategy vs. Gmo Global Equity | Balanced Strategy vs. Artisan Select Equity | Balanced Strategy vs. Balanced Fund Retail | Balanced Strategy vs. Touchstone International Equity |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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