Correlation Between Anchor Risk and Kensington Managed

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

By analyzing existing cross correlation between Anchor Risk Managed and Kensington Managed Income, you can compare the effects of market volatilities on Anchor Risk and Kensington Managed 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 Anchor Risk with a short position of Kensington Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anchor Risk and Kensington Managed.

Diversification Opportunities for Anchor Risk and Kensington Managed

-0.23

Correlation Coefficient

Anchor Risk  Kensington Managed

Very good diversification

The 3 months correlation between Anchor and Kensington is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Anchor Risk Managed and Kensington Managed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Managed Income and Anchor Risk 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 Anchor Risk Managed are associated (or correlated) with Kensington Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Managed Income has no effect on the direction of Anchor Risk i.e., Anchor Risk and Kensington Managed go up and down completely randomly.

Pair Corralation between Anchor Risk and Kensington Managed

Assuming the 90 days horizon Anchor Risk Managed is expected to under-perform the Kensington Managed. In addition to that, Anchor Risk is 2.09 times more volatile than Kensington Managed Income. It trades about -0.12 of its total potential returns per unit of risk. Kensington Managed Income is currently generating about 0.05 per unit of volatility. If you would invest  971.00  in Kensington Managed Income on December 30, 2024 and sell it today you would earn a total of  9.00  from holding Kensington Managed Income or generate 0.93% return on investment over 90 days.

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

Anchor Risk Managed  vs.  Kensington Managed Income

Anchor Risk Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Anchor Risk Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Anchor Risk is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kensington Managed Income

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kensington Managed Income are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Kensington Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Anchor Risk and Kensington Managed

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

The idea behind Anchor Risk Managed and Kensington Managed Income 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.