Correlation Between Elfun Diversified and Iaadx

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

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

Diversification Opportunities for Elfun Diversified and Iaadx

0.5

Correlation Coefficient

Elfun Diversified  Iaadx

Very weak diversification

The 3 months correlation between Elfun and Iaadx is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Elfun Diversified Fund and Iaadx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iaadx and Elfun Diversified 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 Elfun Diversified Fund are associated (or correlated) with Iaadx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iaadx has no effect on the direction of Elfun Diversified i.e., Elfun Diversified and Iaadx go up and down completely randomly.

Pair Corralation between Elfun Diversified and Iaadx

Assuming the 90 days horizon Elfun Diversified Fund is expected to under-perform the Iaadx. But the mutual fund apears to be less risky and, when comparing its historical volatility, Elfun Diversified Fund is 1.0 times less risky than Iaadx. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Iaadx is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  911.00  in Iaadx on September 25, 2024 and sell it today you would earn a total of  12.00  from holding Iaadx or generate 1.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Elfun Diversified Fund  vs.  Iaadx

Elfun Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

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

Iaadx

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Elfun Diversified and Iaadx

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

The idea behind Elfun Diversified Fund and Iaadx 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.