Correlation Between Spectrum Unconstrained and Kensington Managed
Can any of the company-specific risk be diversified away by investing in both Spectrum Unconstrained and Kensington Managed 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 Spectrum Unconstrained and Kensington Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spectrum Unconstrained and Kensington Managed Income, you can compare the effects of market volatilities on Spectrum Unconstrained and Kensington Managed 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 Spectrum Unconstrained with a short position of Kensington Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spectrum Unconstrained and Kensington Managed.
Diversification Opportunities for Spectrum Unconstrained and Kensington Managed
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Spectrum and Kensington is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Unconstrained and Kensington Managed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Managed Income and Spectrum Unconstrained 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 Spectrum Unconstrained are associated (or correlated) with Kensington Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Managed Income has no effect on the direction of Spectrum Unconstrained i.e., Spectrum Unconstrained and Kensington Managed go up and down completely randomly.
Pair Corralation between Spectrum Unconstrained and Kensington Managed
Assuming the 90 days horizon Spectrum Unconstrained is expected to generate 1.42 times less return on investment than Kensington Managed. In addition to that, Spectrum Unconstrained is 1.41 times more volatile than Kensington Managed Income. It trades about 0.1 of its total potential returns per unit of risk. Kensington Managed Income is currently generating about 0.21 per unit of volatility. If you would invest 954.00 in Kensington Managed Income on September 14, 2024 and sell it today you would earn a total of 44.00 from holding Kensington Managed Income or generate 4.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spectrum Unconstrained vs. Kensington Managed Income
Performance |
| Timeline |
| Spectrum Unconstrained |
| Kensington Managed Income |
Spectrum Unconstrained and Kensington Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spectrum Unconstrained and Kensington Managed
The main advantage of trading using opposite Spectrum Unconstrained and Kensington Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spectrum Unconstrained position performs unexpectedly, Kensington Managed 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 Kensington Managed will offset losses from the drop in Kensington Managed's long position.The idea behind Spectrum Unconstrained and Kensington Managed Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Kensington Managed vs. Spectrum Advisors Preferred | Kensington Managed vs. Ontrack E Fund | Kensington Managed vs. Ontrack E Fund | Kensington Managed vs. Spectrum Unconstrained |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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