Correlation Between Stellar and Advantage Portfolio
Can any of the company-specific risk be diversified away by investing in both Stellar and Advantage Portfolio 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 Stellar and Advantage Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stellar and Advantage Portfolio Class, you can compare the effects of market volatilities on Stellar and Advantage Portfolio 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 Stellar with a short position of Advantage Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and Advantage Portfolio.
Diversification Opportunities for Stellar and Advantage Portfolio
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Stellar and Advantage is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Advantage Portfolio Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Portfolio Class and Stellar 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 Stellar are associated (or correlated) with Advantage Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Portfolio Class has no effect on the direction of Stellar i.e., Stellar and Advantage Portfolio go up and down completely randomly.
Pair Corralation between Stellar and Advantage Portfolio
Assuming the 90 days trading horizon Stellar is expected to generate 5.5 times more return on investment than Advantage Portfolio. However, Stellar is 5.5 times more volatile than Advantage Portfolio Class. It trades about 0.13 of its potential returns per unit of risk. Advantage Portfolio Class is currently generating about 0.12 per unit of risk. If you would invest 11.00 in Stellar on October 12, 2024 and sell it today you would earn a total of 28.00 from holding Stellar or generate 254.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 88.77% |
| Values | Daily Returns |
Stellar vs. Advantage Portfolio Class
Performance |
| Timeline |
| Stellar |
| Advantage Portfolio Class |
Stellar and Advantage Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stellar and Advantage Portfolio
The main advantage of trading using opposite Stellar and Advantage Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stellar position performs unexpectedly, Advantage Portfolio 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 Advantage Portfolio will offset losses from the drop in Advantage Portfolio's long position.The idea behind Stellar and Advantage Portfolio Class 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.| Advantage Portfolio vs. Lgm Risk Managed | Advantage Portfolio vs. Lord Abbett Short | Advantage Portfolio vs. Barings High Yield | Advantage Portfolio vs. Dunham High Yield |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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