Correlation Between Associated Capital and Bancroft Fund

Can any of the company-specific risk be diversified away by investing in both Associated Capital and Bancroft 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 Associated Capital and Bancroft Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Associated Capital Group and Bancroft Fund Limited, you can compare the effects of market volatilities on Associated Capital and Bancroft 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 Associated Capital with a short position of Bancroft Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated Capital and Bancroft Fund.

Diversification Opportunities for Associated Capital and Bancroft Fund

0.7

Correlation Coefficient

Associated Capital  Bancroft Fund

Poor diversification

The 3 months correlation between Associated and Bancroft is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Associated Capital Group and Bancroft Fund Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bancroft Fund Limited and Associated Capital 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 Associated Capital Group are associated (or correlated) with Bancroft Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bancroft Fund Limited has no effect on the direction of Associated Capital i.e., Associated Capital and Bancroft Fund go up and down completely randomly.

Pair Corralation between Associated Capital and Bancroft Fund

Allowing for the 90-day total investment horizon Associated Capital is expected to generate 2.66 times less return on investment than Bancroft Fund. In addition to that, Associated Capital is 1.77 times more volatile than Bancroft Fund Limited. It trades about 0.03 of its total potential returns per unit of risk. Bancroft Fund Limited is currently generating about 0.13 per unit of volatility. If you would invest  1,422  in Bancroft Fund Limited on September 5, 2024 and sell it today you would earn a total of  434.00  from holding Bancroft Fund Limited or generate 30.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Associated Capital Group  vs.  Bancroft Fund Limited

Associated Capital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Capital Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, Associated Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bancroft Fund Limited

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bancroft Fund Limited are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Bancroft Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Associated Capital and Bancroft Fund

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

The idea behind Associated Capital Group and Bancroft Fund Limited 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.