Correlation Between Alpine Ultra and Kensington Managed

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

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

Diversification Opportunities for Alpine Ultra and Kensington Managed

0.33

Correlation Coefficient

Alpine Ultra  Kensington Managed

Weak diversification

The 3 months correlation between Alpine and Kensington is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Alpine Ultra Short 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 Alpine Ultra 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 Alpine Ultra Short 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 Alpine Ultra i.e., Alpine Ultra and Kensington Managed go up and down completely randomly.

Pair Corralation between Alpine Ultra and Kensington Managed

Assuming the 90 days horizon Alpine Ultra is expected to generate 1.84 times less return on investment than Kensington Managed. But when comparing it to its historical volatility, Alpine Ultra Short is 2.61 times less risky than Kensington Managed. It trades about 0.17 of its potential returns per unit of risk. Kensington Managed Income is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  983.00  in Kensington Managed Income on September 13, 2024 and sell it today you would earn a total of  11.00  from holding Kensington Managed Income or generate 1.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Alpine Ultra Short  vs.  Kensington Managed Income

Alpine Ultra Short

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alpine Ultra Short are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Alpine Ultra 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

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kensington Managed Income are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 Alpine Ultra and Kensington Managed

The main advantage of trading using opposite Alpine Ultra and Kensington Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpine Ultra 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 Alpine Ultra Short 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.