Correlation Between Auer Growth and Rational Defensive

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

By analyzing existing cross correlation between Auer Growth Fund and Rational Defensive Growth, you can compare the effects of market volatilities on Auer Growth and Rational Defensive 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 Auer Growth with a short position of Rational Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auer Growth and Rational Defensive.

Diversification Opportunities for Auer Growth and Rational Defensive

-0.3

Correlation Coefficient

Auer Growth  Rational Defensive

Very good diversification

The 3 months correlation between Auer and Rational is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Auer Growth Fund and Rational Defensive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Defensive Growth and Auer Growth 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 Auer Growth Fund are associated (or correlated) with Rational Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Defensive Growth has no effect on the direction of Auer Growth i.e., Auer Growth and Rational Defensive go up and down completely randomly.

Pair Corralation between Auer Growth and Rational Defensive

Assuming the 90 days horizon Auer Growth Fund is expected to generate 0.77 times more return on investment than Rational Defensive. However, Auer Growth Fund is 1.3 times less risky than Rational Defensive. It trades about 0.27 of its potential returns per unit of risk. Rational Defensive Growth is currently generating about 0.07 per unit of risk. If you would invest  1,313  in Auer Growth Fund on October 20, 2024 and sell it today you would earn a total of  49.00  from holding Auer Growth Fund or generate 3.73% return on investment over 90 days.

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

Auer Growth Fund  vs.  Rational Defensive Growth

Auer Growth Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auer Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Rational Defensive Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Defensive Growth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Rational Defensive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Auer Growth and Rational Defensive

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

The idea behind Auer Growth Fund and Rational Defensive Growth 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.