Correlation Between Cutler Equity and Ariel Appreciation

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

By analyzing existing cross correlation between Cutler Equity and Ariel Appreciation Fund, you can compare the effects of market volatilities on Cutler Equity and Ariel Appreciation 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 Cutler Equity with a short position of Ariel Appreciation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cutler Equity and Ariel Appreciation.

Diversification Opportunities for Cutler Equity and Ariel Appreciation

0.59

Correlation Coefficient

Cutler Equity  Ariel Appreciation

Very weak diversification

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

Pair Corralation between Cutler Equity and Ariel Appreciation

Assuming the 90 days horizon Cutler Equity is expected to generate 0.7 times more return on investment than Ariel Appreciation. However, Cutler Equity is 1.43 times less risky than Ariel Appreciation. It trades about 0.04 of its potential returns per unit of risk. Ariel Appreciation Fund is currently generating about -0.09 per unit of risk. If you would invest  2,652  in Cutler Equity on December 21, 2024 and sell it today you would earn a total of  48.00  from holding Cutler Equity or generate 1.81% return on investment over 90 days.

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

Cutler Equity  vs.  Ariel Appreciation Fund

Cutler Equity

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cutler Equity are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Cutler Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ariel Appreciation

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Cutler Equity and Ariel Appreciation

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

The idea behind Cutler Equity and Ariel Appreciation 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.