Correlation Between Value Fund and Smead Value
Can any of the company-specific risk be diversified away by investing in both Value Fund and Smead Value 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 Smead Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Value Fund Investor and Smead Value Fund, you can compare the effects of market volatilities on Value Fund and Smead Value 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 Smead Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Smead Value.
Diversification Opportunities for Value Fund and Smead Value
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Value and Smead is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Investor and Smead Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smead Value Fund 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 Investor are associated (or correlated) with Smead Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smead Value Fund has no effect on the direction of Value Fund i.e., Value Fund and Smead Value go up and down completely randomly.
Pair Corralation between Value Fund and Smead Value
Assuming the 90 days horizon Value Fund is expected to generate 3.88 times less return on investment than Smead Value. But when comparing it to its historical volatility, Value Fund Investor is 1.12 times less risky than Smead Value. It trades about 0.02 of its potential returns per unit of risk. Smead Value Fund is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6,711 in Smead Value Fund on August 29, 2024 and sell it today you would earn a total of 1,853 from holding Smead Value Fund or generate 27.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Value Fund Investor vs. Smead Value Fund
Performance |
| Timeline |
| Value Fund Investor |
| Smead Value Fund |
Value Fund and Smead Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Fund and Smead Value
The main advantage of trading using opposite Value Fund and Smead Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund position performs unexpectedly, Smead Value 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 Smead Value will offset losses from the drop in Smead Value's long position.| Value Fund vs. Dodge Cox Stock | Value Fund vs. American Mutual Fund | Value Fund vs. American Funds American | Value Fund vs. American Funds American |
| Smead Value vs. Value Fund Investor | Smead Value vs. HUMANA INC | Smead Value vs. Aquagold International | Smead Value vs. Barloworld Ltd ADR |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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