Correlation Between CSIF III and LO Funds

Can any of the company-specific risk be diversified away by investing in both CSIF III and LO Funds 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 CSIF III and LO Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CSIF III Eq and LO Funds Swiss, you can compare the effects of market volatilities on CSIF III and LO Funds 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 CSIF III with a short position of LO Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSIF III and LO Funds.

Diversification Opportunities for CSIF III and LO Funds

-0.62

Correlation Coefficient

CSIF III  LO Funds

Excellent diversification

The 3 months correlation between CSIF and 0P00001R8Q is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding CSIF III Eq and LO Funds Swiss in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LO Funds Swiss and CSIF III 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 CSIF III Eq are associated (or correlated) with LO Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LO Funds Swiss has no effect on the direction of CSIF III i.e., CSIF III and LO Funds go up and down completely randomly.

Pair Corralation between CSIF III and LO Funds

Assuming the 90 days trading horizon CSIF III Eq is expected to generate 1.2 times more return on investment than LO Funds. However, CSIF III is 1.2 times more volatile than LO Funds Swiss. It trades about -0.11 of its potential returns per unit of risk. LO Funds Swiss is currently generating about -0.14 per unit of risk. If you would invest  172,219  in CSIF III Eq on September 27, 2024 and sell it today you would lose (2,788) from holding CSIF III Eq or give up 1.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

CSIF III Eq  vs.  LO Funds Swiss

CSIF III Eq

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CSIF III Eq are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, CSIF III is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

LO Funds Swiss

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LO Funds Swiss has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with CSIF III and LO Funds

The main advantage of trading using opposite CSIF III and LO Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSIF III position performs unexpectedly, LO Funds 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 LO Funds will offset losses from the drop in LO Funds' long position.

The idea behind CSIF III Eq and LO Funds Swiss 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.

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.