Correlation Between Discipline Fund and Regents Park

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

By analyzing existing cross correlation between Discipline Fund ETF and Regents Park Hedged, you can compare the effects of market volatilities on Discipline Fund and Regents Park 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 Discipline Fund with a short position of Regents Park. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discipline Fund and Regents Park.

Diversification Opportunities for Discipline Fund and Regents Park

0.73

Correlation Coefficient

Discipline Fund  Regents Park

Poor diversification

The 3 months correlation between Discipline and Regents is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Discipline Fund ETF and Regents Park Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regents Park Hedged and Discipline Fund 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 Discipline Fund ETF are associated (or correlated) with Regents Park. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regents Park Hedged has no effect on the direction of Discipline Fund i.e., Discipline Fund and Regents Park go up and down completely randomly.

Pair Corralation between Discipline Fund and Regents Park

Given the investment horizon of 90 days Discipline Fund ETF is expected to generate 0.45 times more return on investment than Regents Park. However, Discipline Fund ETF is 2.2 times less risky than Regents Park. It trades about 0.03 of its potential returns per unit of risk. Regents Park Hedged is currently generating about -0.03 per unit of risk. If you would invest  2,288  in Discipline Fund ETF on November 28, 2024 and sell it today you would earn a total of  15.00  from holding Discipline Fund ETF or generate 0.66% return on investment over 90 days.

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

Discipline Fund ETF  vs.  Regents Park Hedged

Discipline Fund ETF

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Discipline Fund ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Discipline Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Regents Park Hedged

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regents Park Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Regents Park is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Discipline Fund and Regents Park

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

The idea behind Discipline Fund ETF and Regents Park Hedged 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.