Correlation Between Smead Value and Jensen Quality
Can any of the company-specific risk be diversified away by investing in both Smead Value and Jensen Quality 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 Smead Value and Jensen Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smead Value Fund and Jensen Quality Value, you can compare the effects of market volatilities on Smead Value and Jensen Quality 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 Smead Value with a short position of Jensen Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smead Value and Jensen Quality.
Diversification Opportunities for Smead Value and Jensen Quality
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Smead and Jensen is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Smead Value Fund and Jensen Quality Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jensen Quality Value and Smead Value 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 Smead Value Fund are associated (or correlated) with Jensen Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jensen Quality Value has no effect on the direction of Smead Value i.e., Smead Value and Jensen Quality go up and down completely randomly.
Pair Corralation between Smead Value and Jensen Quality
Assuming the 90 days horizon Smead Value Fund is expected to generate 0.56 times more return on investment than Jensen Quality. However, Smead Value Fund is 1.79 times less risky than Jensen Quality. It trades about 0.1 of its potential returns per unit of risk. Jensen Quality Value is currently generating about -0.04 per unit of risk. If you would invest 8,371 in Smead Value Fund on August 29, 2024 and sell it today you would earn a total of 161.00 from holding Smead Value Fund or generate 1.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smead Value Fund vs. Jensen Quality Value
Performance |
| Timeline |
| Smead Value Fund |
| Jensen Quality Value |
Smead Value and Jensen Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smead Value and Jensen Quality
The main advantage of trading using opposite Smead Value and Jensen Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smead Value position performs unexpectedly, Jensen Quality 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 Jensen Quality will offset losses from the drop in Jensen Quality's long position.| Smead Value vs. Value Fund Investor | Smead Value vs. HUMANA INC | Smead Value vs. Aquagold International | Smead Value vs. Barloworld Ltd ADR |
| Jensen Quality vs. Applied Finance Explorer | Jensen Quality vs. Smead Value Fund | Jensen Quality vs. Heartland Mid Cap | Jensen Quality vs. Madison Dividend Income |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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