Correlation Between ALPSSmith Balanced and PSMB

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

By analyzing existing cross correlation between ALPSSmith Balanced Opportunity and PSMB, you can compare the effects of market volatilities on ALPSSmith Balanced and PSMB 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 ALPSSmith Balanced with a short position of PSMB. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALPSSmith Balanced and PSMB.

Diversification Opportunities for ALPSSmith Balanced and PSMB

-0.53

Correlation Coefficient

ALPSSmith Balanced  PSMB

Excellent diversification

The 3 months correlation between ALPSSmith and PSMB is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding ALPSSmith Balanced Opportunity and PSMB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSMB and ALPSSmith Balanced 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 ALPSSmith Balanced Opportunity are associated (or correlated) with PSMB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSMB has no effect on the direction of ALPSSmith Balanced i.e., ALPSSmith Balanced and PSMB go up and down completely randomly.

Pair Corralation between ALPSSmith Balanced and PSMB

Assuming the 90 days horizon ALPSSmith Balanced Opportunity is expected to generate 1.27 times more return on investment than PSMB. However, ALPSSmith Balanced is 1.27 times more volatile than PSMB. It trades about 0.09 of its potential returns per unit of risk. PSMB is currently generating about -0.05 per unit of risk. If you would invest  975.00  in ALPSSmith Balanced Opportunity on October 23, 2024 and sell it today you would earn a total of  259.00  from holding ALPSSmith Balanced Opportunity or generate 26.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	21.46%
Values	Daily Returns

ALPSSmith Balanced Opportunity  vs.  PSMB

ALPSSmith Balanced

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ALPSSmith Balanced Opportunity are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, ALPSSmith Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PSMB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PSMB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, PSMB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ALPSSmith Balanced and PSMB

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

The idea behind ALPSSmith Balanced Opportunity and PSMB 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.