Correlation Between Value Fund and Balanced Fund
Can any of the company-specific risk be diversified away by investing in both Value Fund and Balanced 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 Value Fund and Balanced Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Value Fund A and Balanced Fund I, you can compare the effects of market volatilities on Value Fund and Balanced 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 Value Fund with a short position of Balanced Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Balanced Fund.
Diversification Opportunities for Value Fund and Balanced Fund
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Value and Balanced is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund A and Balanced Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund I and Value 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 Value Fund A are associated (or correlated) with Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund I has no effect on the direction of Value Fund i.e., Value Fund and Balanced Fund go up and down completely randomly.
Pair Corralation between Value Fund and Balanced Fund
Assuming the 90 days horizon Value Fund A is expected to generate 1.25 times more return on investment than Balanced Fund. However, Value Fund is 1.25 times more volatile than Balanced Fund I. It trades about 0.21 of its potential returns per unit of risk. Balanced Fund I is currently generating about 0.17 per unit of risk. If you would invest 860.00 in Value Fund A on August 29, 2024 and sell it today you would earn a total of 27.00 from holding Value Fund A or generate 3.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Value Fund A vs. Balanced Fund I
Performance |
| Timeline |
| Value Fund A |
| Balanced Fund I |
Value Fund and Balanced Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Fund and Balanced Fund
The main advantage of trading using opposite Value Fund and Balanced Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund position performs unexpectedly, Balanced 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 Balanced Fund will offset losses from the drop in Balanced Fund's long position.| Value Fund vs. Astor Longshort Fund | Value Fund vs. Maryland Short Term Tax Free | Value Fund vs. Quantitative Longshort Equity | Value Fund vs. Aqr Long Short Equity |
| Balanced Fund vs. One Choice Portfolio | Balanced Fund vs. One Choice Portfolio | Balanced Fund vs. One Choice Portfolio | Balanced Fund vs. One Choice Portfolio |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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