Correlation Between Balanced Strategy and Select Equity
Can any of the company-specific risk be diversified away by investing in both Balanced Strategy and Select Equity 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 Select Equity 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 Select Equity Fund, you can compare the effects of market volatilities on Balanced Strategy and Select Equity 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 Select Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Strategy and Select Equity.
Diversification Opportunities for Balanced Strategy and Select Equity
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Balanced and Select is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy Fund and Select Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Equity 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 Select Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Equity has no effect on the direction of Balanced Strategy i.e., Balanced Strategy and Select Equity go up and down completely randomly.
Pair Corralation between Balanced Strategy and Select Equity
Assuming the 90 days horizon Balanced Strategy is expected to generate 2.09 times less return on investment than Select Equity. But when comparing it to its historical volatility, Balanced Strategy Fund is 1.93 times less risky than Select Equity. It trades about 0.36 of its potential returns per unit of risk. Select Equity Fund is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 1,942 in Select Equity Fund on September 1, 2024 and sell it today you would earn a total of 133.00 from holding Select Equity Fund or generate 6.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Balanced Strategy Fund vs. Select Equity Fund
Performance |
| Timeline |
| Balanced Strategy |
| Select Equity |
Balanced Strategy and Select Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Strategy and Select Equity
The main advantage of trading using opposite Balanced Strategy and Select Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Strategy position performs unexpectedly, Select Equity 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 Select Equity will offset losses from the drop in Select Equity's long position.| Balanced Strategy vs. Omni Small Cap Value | Balanced Strategy vs. Growth Opportunities Fund | Balanced Strategy vs. Nasdaq 100 Index Fund | Balanced Strategy vs. Balanced Fund Investor |
| Select Equity vs. Artisan Global Unconstrained | Select Equity vs. Ms Global Fixed | Select Equity vs. Morgan Stanley Global | Select Equity vs. Wasatch Global 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
Other Complementary Tools
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |