Correlation Between Leisure Fund and Retailing Fund
Can any of the company-specific risk be diversified away by investing in both Leisure Fund and Retailing Fund 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 Leisure Fund and Retailing Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leisure Fund Investor and Retailing Fund Investor, you can compare the effects of market volatilities on Leisure Fund and Retailing Fund 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 Leisure Fund with a short position of Retailing Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leisure Fund and Retailing Fund.
Diversification Opportunities for Leisure Fund and Retailing Fund
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Leisure and Retailing is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Leisure Fund Investor and Retailing Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retailing Fund Investor and Leisure Fund 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 Leisure Fund Investor are associated (or correlated) with Retailing Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retailing Fund Investor has no effect on the direction of Leisure Fund i.e., Leisure Fund and Retailing Fund go up and down completely randomly.
Pair Corralation between Leisure Fund and Retailing Fund
Assuming the 90 days horizon Leisure Fund Investor is expected to under-perform the Retailing Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Leisure Fund Investor is 1.01 times less risky than Retailing Fund. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Retailing Fund Investor is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 5,488 in Retailing Fund Investor on October 21, 2024 and sell it today you would earn a total of 14.00 from holding Retailing Fund Investor or generate 0.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leisure Fund Investor vs. Retailing Fund Investor
Performance |
| Timeline |
| Leisure Fund Investor |
| Retailing Fund Investor |
Leisure Fund and Retailing Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leisure Fund and Retailing Fund
The main advantage of trading using opposite Leisure Fund and Retailing Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leisure Fund position performs unexpectedly, Retailing Fund 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 Retailing Fund will offset losses from the drop in Retailing Fund's long position.| Leisure Fund vs. Retailing Fund Investor | Leisure Fund vs. Financial Services Fund | Leisure Fund vs. Banking Fund Investor | Leisure Fund vs. Health Care Fund |
| Retailing Fund vs. Leisure Fund Investor | Retailing Fund vs. Banking Fund Investor | Retailing Fund vs. Technology Fund Investor | Retailing Fund vs. Financial Services Fund |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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