Correlation Between Balanced Fund and Vela Large

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Can any of the company-specific risk be diversified away by investing in both Balanced Fund and Vela Large 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 Balanced Fund and Vela Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Fund Investor and Vela Large Cap, you can compare the effects of market volatilities on Balanced Fund and Vela Large 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 Balanced Fund with a short position of Vela Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Vela Large.

Diversification Opportunities for Balanced Fund and Vela Large

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Balanced and Vela is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Investor and Vela Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vela Large Cap and Balanced 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 Balanced Fund Investor are associated (or correlated) with Vela Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vela Large Cap has no effect on the direction of Balanced Fund i.e., Balanced Fund and Vela Large go up and down completely randomly.

Pair Corralation between Balanced Fund and Vela Large

Assuming the 90 days horizon Balanced Fund Investor is expected to generate 0.98 times more return on investment than Vela Large. However, Balanced Fund Investor is 1.02 times less risky than Vela Large. It trades about 0.21 of its potential returns per unit of risk. Vela Large Cap is currently generating about 0.07 per unit of risk. If you would invest  2,009  in Balanced Fund Investor on September 14, 2024 and sell it today you would earn a total of  32.00  from holding Balanced Fund Investor or generate 1.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Balanced Fund Investor  vs.  Vela Large Cap

 Performance 
       Timeline  
Balanced Fund Investor 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Investor are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Balanced Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Vela Large Cap 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Vela Large Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vela Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Balanced Fund and Vela Large Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Balanced Fund and Vela Large

The main advantage of trading using opposite Balanced Fund and Vela Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund position performs unexpectedly, Vela Large 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 Vela Large will offset losses from the drop in Vela Large's long position.
The idea behind Balanced Fund Investor and Vela Large Cap 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.
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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