Correlation Between Kensington Defender and Balanced Fund

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

By analyzing existing cross correlation between Kensington Defender Institutional and Balanced Fund Retail, you can compare the effects of market volatilities on Kensington Defender and Balanced Fund 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 Kensington Defender with a short position of Balanced Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kensington Defender and Balanced Fund.

Diversification Opportunities for Kensington Defender and Balanced Fund

0.6

Correlation Coefficient

Kensington Defender  Balanced Fund

Poor diversification

The 3 months correlation between Kensington and Balanced is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Kensington Defender Institutio and Balanced Fund Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Retail and Kensington Defender 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 Kensington Defender Institutional are associated (or correlated) with Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Retail has no effect on the direction of Kensington Defender i.e., Kensington Defender and Balanced Fund go up and down completely randomly.

Pair Corralation between Kensington Defender and Balanced Fund

Assuming the 90 days horizon Kensington Defender is expected to generate 1.22 times less return on investment than Balanced Fund. But when comparing it to its historical volatility, Kensington Defender Institutional is 1.24 times less risky than Balanced Fund. It trades about 0.04 of its potential returns per unit of risk. Balanced Fund Retail is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,118  in Balanced Fund Retail on September 23, 2024 and sell it today you would earn a total of  138.00  from holding Balanced Fund Retail or generate 12.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	79.48%
Values	Daily Returns

Kensington Defender Institutio  vs.  Balanced Fund Retail

Kensington Defender

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kensington Defender Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Kensington Defender is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Balanced Fund Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Balanced Fund Retail has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental 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 Kensington Defender and Balanced Fund

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

The idea behind Kensington Defender Institutional and Balanced Fund Retail 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.