Correlation Between Eic Value and Rational Defensive

Can any of the company-specific risk be diversified away by investing in both Eic Value and Rational Defensive 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 Eic Value and Rational Defensive into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eic Value Fund and Rational Defensive Growth, you can compare the effects of market volatilities on Eic Value and Rational Defensive 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 Eic Value with a short position of Rational Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eic Value and Rational Defensive.

Diversification Opportunities for Eic Value and Rational Defensive

-0.09

Correlation Coefficient

Eic Value  Rational Defensive

Good diversification

The 3 months correlation between Eic and Rational is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Eic Value Fund and Rational Defensive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Defensive Growth and Eic Value 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 Eic Value Fund are associated (or correlated) with Rational Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Defensive Growth has no effect on the direction of Eic Value i.e., Eic Value and Rational Defensive go up and down completely randomly.

Pair Corralation between Eic Value and Rational Defensive

Assuming the 90 days horizon Eic Value Fund is expected to generate 0.55 times more return on investment than Rational Defensive. However, Eic Value Fund is 1.82 times less risky than Rational Defensive. It trades about 0.16 of its potential returns per unit of risk. Rational Defensive Growth is currently generating about -0.11 per unit of risk. If you would invest  1,680  in Eic Value Fund on December 21, 2024 and sell it today you would earn a total of  114.00  from holding Eic Value Fund or generate 6.79% return on investment over 90 days.

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

Eic Value Fund  vs.  Rational Defensive Growth

Eic Value Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eic Value Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Eic Value may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Rational Defensive Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rational Defensive Growth 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 Eic Value and Rational Defensive

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

The idea behind Eic Value Fund and Rational Defensive Growth 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.