Correlation Between Six Circles and Six Circles

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

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

Diversification Opportunities for Six Circles and Six Circles

0.87

Correlation Coefficient

Six Circles  Six Circles

Very poor diversification

The 3 months correlation between Six and Six is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Six Circles Ultra and Six Circles Unconstrained in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Circles Unconstrained and Six Circles 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 Six Circles Ultra are associated (or correlated) with Six Circles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Circles Unconstrained has no effect on the direction of Six Circles i.e., Six Circles and Six Circles go up and down completely randomly.

Pair Corralation between Six Circles and Six Circles

Assuming the 90 days horizon Six Circles is expected to generate 4.58 times less return on investment than Six Circles. But when comparing it to its historical volatility, Six Circles Ultra is 15.34 times less risky than Six Circles. It trades about 0.39 of its potential returns per unit of risk. Six Circles Unconstrained is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,187  in Six Circles Unconstrained on September 4, 2024 and sell it today you would earn a total of  731.00  from holding Six Circles Unconstrained or generate 61.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Six Circles Ultra  vs.  Six Circles Unconstrained

Six Circles Ultra

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Six Circles Ultra are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Six Circles is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Six Circles Unconstrained

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Six Circles Unconstrained are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Six Circles may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Six Circles and Six Circles

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

The idea behind Six Circles Ultra and Six Circles Unconstrained 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.