Correlation Between Balanced Strategy and Select Us
Can any of the company-specific risk be diversified away by investing in both Balanced Strategy and Select Us 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 Us 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 Us 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 Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Strategy and Select Us.
Diversification Opportunities for Balanced Strategy and Select Us
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Balanced and Select is 0.63. 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 Us. 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 Us go up and down completely randomly.
Pair Corralation between Balanced Strategy and Select Us
Assuming the 90 days horizon Balanced Strategy is expected to generate 3.15 times less return on investment than Select Us. But when comparing it to its historical volatility, Balanced Strategy Fund is 1.91 times less risky than Select Us. It trades about 0.13 of its potential returns per unit of risk. Select Equity Fund is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,979 in Select Equity Fund on August 29, 2024 and sell it today you would earn a total of 85.00 from holding Select Equity Fund or generate 4.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Strategy Fund vs. Select Equity Fund
Performance |
| Timeline |
| Balanced Strategy |
| Select Equity |
Balanced Strategy and Select Us Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Strategy and Select Us
The main advantage of trading using opposite Balanced Strategy and Select Us positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Strategy position performs unexpectedly, Select Us 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 Us will offset losses from the drop in Select Us' long position.| Balanced Strategy vs. International Developed Markets | Balanced Strategy vs. Global Real Estate | Balanced Strategy vs. Global Real Estate | Balanced Strategy vs. Global Real Estate |
| Select Us vs. International Developed Markets | Select Us vs. Global Real Estate | Select Us vs. Global Real Estate | Select Us vs. Global Real Estate |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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