Correlation Between Kensington Defender and Fmasx

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

Diversification Opportunities for Kensington Defender and Fmasx

0.59

Correlation Coefficient

Kensington Defender  Fmasx

Very weak diversification

The 3 months correlation between Kensington and Fmasx is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Kensington Defender Institutio and Fmasx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fmasx 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 Fmasx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fmasx has no effect on the direction of Kensington Defender i.e., Kensington Defender and Fmasx go up and down completely randomly.

Pair Corralation between Kensington Defender and Fmasx

Assuming the 90 days horizon Kensington Defender Institutional is expected to generate 0.6 times more return on investment than Fmasx. However, Kensington Defender Institutional is 1.66 times less risky than Fmasx. It trades about -0.05 of its potential returns per unit of risk. Fmasx is currently generating about -0.09 per unit of risk. If you would invest  1,031  in Kensington Defender Institutional on December 21, 2024 and sell it today you would lose (24.00) from holding Kensington Defender Institutional or give up 2.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Kensington Defender Institutio  vs.  Fmasx

Kensington Defender

Risk-Adjusted Performance

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.

Fmasx

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fmasx has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Fmasx

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

The idea behind Kensington Defender Institutional and Fmasx 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.