Correlation Between Value Fund and Select Fund
Can any of the company-specific risk be diversified away by investing in both Value Fund 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 Value Fund and Select Fund 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 Select Fund A, you can compare the effects of market volatilities on Value Fund 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 Value Fund with a short position of Select Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Select Fund.
Diversification Opportunities for Value Fund and Select Fund
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Value and Select is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Investor and Select Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund A 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 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 A has no effect on the direction of Value Fund i.e., Value Fund and Select Fund go up and down completely randomly.
Pair Corralation between Value Fund and Select Fund
Assuming the 90 days horizon Value Fund Investor is expected to under-perform the Select Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Value Fund Investor is 1.63 times less risky than Select Fund. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Select Fund A is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 10,620 in Select Fund A on January 14, 2025 and sell it today you would lose (579.00) from holding Select Fund A or give up 5.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Value Fund Investor vs. Select Fund A
Performance |
| Timeline |
| Value Fund Investor |
| Select Fund A |
Value Fund and Select Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Fund and Select Fund
The main advantage of trading using opposite Value Fund and Select Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund 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.| Value Fund vs. International Growth Fund | Value Fund vs. Growth Fund Investor | Value Fund vs. Equity Income Fund | Value Fund vs. Ultra Fund Investor |
| Select Fund vs. Ultra Fund A | Select Fund vs. International Growth Fund | Select Fund vs. Select Fund I | Select Fund vs. Growth Fund A |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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