Correlation Between Enhanced Large and Smead Value

Can any of the company-specific risk be diversified away by investing in both Enhanced Large and Smead 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 Smead 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 Smead Value Fund, you can compare the effects of market volatilities on Enhanced Large and Smead 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 Smead Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enhanced Large and Smead Value.

Diversification Opportunities for Enhanced Large and Smead Value

0.04

Correlation Coefficient

Enhanced Large  Smead Value

Significant diversification

The 3 months correlation between Enhanced and Smead is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Enhanced Large Pany and Smead Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smead Value Fund 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 Smead Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smead Value Fund has no effect on the direction of Enhanced Large i.e., Enhanced Large and Smead Value go up and down completely randomly.

Pair Corralation between Enhanced Large and Smead Value

Assuming the 90 days horizon Enhanced Large Pany is expected to generate 0.98 times more return on investment than Smead Value. However, Enhanced Large Pany is 1.02 times less risky than Smead Value. It trades about 0.06 of its potential returns per unit of risk. Smead Value Fund is currently generating about -0.12 per unit of risk. If you would invest  1,490  in Enhanced Large Pany on September 28, 2024 and sell it today you would earn a total of  44.00  from holding Enhanced Large Pany or generate 2.95% return on investment over 90 days.

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

Enhanced Large Pany  vs.  Smead Value Fund

Enhanced Large Pany

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enhanced Large Pany are ranked lower than 4 (%) 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.

Smead Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smead Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Enhanced Large and Smead Value

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

The idea behind Enhanced Large Pany and Smead 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.