Correlation Between Select Equity and Us Defensive
Can any of the company-specific risk be diversified away by investing in both Select Equity and Us Defensive 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 Select Equity and Us Defensive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select Equity Fund and Us Defensive Equity, you can compare the effects of market volatilities on Select Equity and Us Defensive 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 Select Equity with a short position of Us Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Equity and Us Defensive.
Diversification Opportunities for Select Equity and Us Defensive
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Select and REUYX is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Select Equity Fund and Us Defensive Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Defensive Equity and Select Equity 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 Select Equity Fund are associated (or correlated) with Us Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Defensive Equity has no effect on the direction of Select Equity i.e., Select Equity and Us Defensive go up and down completely randomly.
Pair Corralation between Select Equity and Us Defensive
Assuming the 90 days horizon Select Equity Fund is expected to generate 1.14 times more return on investment than Us Defensive. However, Select Equity is 1.14 times more volatile than Us Defensive Equity. It trades about 0.39 of its potential returns per unit of risk. Us Defensive Equity is currently generating about 0.33 per unit of risk. If you would invest 1,942 in Select Equity Fund on September 1, 2024 and sell it today you would earn a total of 132.00 from holding Select Equity Fund or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Select Equity Fund vs. Us Defensive Equity
Performance |
| Timeline |
| Select Equity |
| Us Defensive Equity |
Select Equity and Us Defensive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Equity and Us Defensive
The main advantage of trading using opposite Select Equity and Us Defensive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Equity position performs unexpectedly, Us Defensive 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 Us Defensive will offset losses from the drop in Us Defensive's long position.| Select Equity vs. International Developed Markets | Select Equity vs. Global Real Estate | Select Equity vs. Global Real Estate | Select Equity vs. Growth Strategy Fund |
| Us Defensive vs. International Developed Markets | Us Defensive vs. Global Real Estate | Us Defensive vs. Global Real Estate | Us Defensive 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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