Correlation Between Enhanced Large and Classic Value

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

By analyzing existing cross correlation between Enhanced Large Pany and Classic Value Fund, you can compare the effects of market volatilities on Enhanced Large and Classic Value 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 Enhanced Large with a short position of Classic Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enhanced Large and Classic Value.

Diversification Opportunities for Enhanced Large and Classic Value

0.94

Correlation Coefficient

Enhanced Large  Classic Value

Almost no diversification

The 3 months correlation between Enhanced and Classic is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Enhanced Large Pany and Classic Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Classic Value and Enhanced Large 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 Enhanced Large Pany are associated (or correlated) with Classic Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Classic Value has no effect on the direction of Enhanced Large i.e., Enhanced Large and Classic Value go up and down completely randomly.

Pair Corralation between Enhanced Large and Classic Value

Assuming the 90 days horizon Enhanced Large Pany is expected to generate 0.83 times more return on investment than Classic Value. However, Enhanced Large Pany is 1.2 times less risky than Classic Value. It trades about 0.12 of its potential returns per unit of risk. Classic Value Fund is currently generating about 0.06 per unit of risk. If you would invest  965.00  in Enhanced Large Pany on September 15, 2024 and sell it today you would earn a total of  575.00  from holding Enhanced Large Pany or generate 59.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Enhanced Large Pany  vs.  Classic Value Fund

Enhanced Large Pany

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enhanced Large Pany are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Enhanced Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Classic Value

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Classic Value Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Classic Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Enhanced Large and Classic Value

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

The idea behind Enhanced Large Pany and Classic Value Fund 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.