Correlation Between Strategic Allocation and Balanced Fund
Can any of the company-specific risk be diversified away by investing in both Strategic Allocation 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 Strategic Allocation and Balanced Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Allocation Servative and Balanced Fund I, you can compare the effects of market volatilities on Strategic Allocation 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 Strategic Allocation with a short position of Balanced Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Allocation and Balanced Fund.
Diversification Opportunities for Strategic Allocation and Balanced Fund
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Strategic and Balanced is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Servative 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 Strategic Allocation 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 Strategic Allocation Servative 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 Strategic Allocation i.e., Strategic Allocation and Balanced Fund go up and down completely randomly.
Pair Corralation between Strategic Allocation and Balanced Fund
Assuming the 90 days horizon Strategic Allocation is expected to generate 1.19 times less return on investment than Balanced Fund. But when comparing it to its historical volatility, Strategic Allocation Servative is 1.33 times less risky than Balanced Fund. It trades about 0.43 of its potential returns per unit of risk. Balanced Fund I is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 1,956 in Balanced Fund I on September 1, 2024 and sell it today you would earn a total of 74.00 from holding Balanced Fund I or generate 3.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Allocation Servative vs. Balanced Fund I
Performance |
| Timeline |
| Strategic Allocation |
| Balanced Fund I |
Strategic Allocation and Balanced Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Allocation and Balanced Fund
The main advantage of trading using opposite Strategic Allocation and Balanced Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Allocation 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.The idea behind Strategic Allocation Servative and Balanced Fund I 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.
| Balanced Fund vs. Heritage Fund I | Balanced Fund vs. Select Fund C | Balanced Fund vs. Aqr Risk Parity | Balanced Fund vs. Ab Discovery Value |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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