Correlation Between Strategic Allocation and Select Fund
Can any of the company-specific risk be diversified away by investing in both Strategic Allocation and Select 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 Select Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Allocation Moderate and Select Fund I, you can compare the effects of market volatilities on Strategic Allocation and Select 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 Select Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Allocation and Select Fund.
Diversification Opportunities for Strategic Allocation and Select Fund
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Strategic and Select is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Moderate and Select Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select 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 Moderate are associated (or correlated) with Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund I has no effect on the direction of Strategic Allocation i.e., Strategic Allocation and Select Fund go up and down completely randomly.
Pair Corralation between Strategic Allocation and Select Fund
Assuming the 90 days horizon Strategic Allocation is expected to generate 1.34 times less return on investment than Select Fund. But when comparing it to its historical volatility, Strategic Allocation Moderate is 2.16 times less risky than Select Fund. It trades about 0.14 of its potential returns per unit of risk. Select Fund I is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 10,440 in Select Fund I on August 26, 2024 and sell it today you would earn a total of 2,486 from holding Select Fund I or generate 23.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Allocation Moderate vs. Select Fund I
Performance |
| Timeline |
| Strategic Allocation |
| Select Fund I |
Strategic Allocation and Select Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Allocation and Select Fund
The main advantage of trading using opposite Strategic Allocation and Select Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Allocation position performs unexpectedly, Select 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 Select Fund will offset losses from the drop in Select Fund's long position.The idea behind Strategic Allocation Moderate and Select 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.
| Select Fund vs. Ultra Fund I | Select Fund vs. International Growth Fund | Select Fund vs. Ultra Fund A | Select Fund vs. Value Fund I |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |