Correlation Between Empiric 2500 and Balanced Fund

Can any of the company-specific risk be diversified away by investing in both Empiric 2500 and Balanced Fund 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 Empiric 2500 and Balanced Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Empiric 2500 Fund and Balanced Fund Investor, you can compare the effects of market volatilities on Empiric 2500 and Balanced Fund 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 Empiric 2500 with a short position of Balanced Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empiric 2500 and Balanced Fund.

Diversification Opportunities for Empiric 2500 and Balanced Fund

0.75

Correlation Coefficient

Empiric 2500  Balanced Fund

Poor diversification

The 3 months correlation between Empiric and Balanced is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Empiric 2500 Fund and Balanced Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Investor and Empiric 2500 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 Empiric 2500 Fund are associated (or correlated) with Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Investor has no effect on the direction of Empiric 2500 i.e., Empiric 2500 and Balanced Fund go up and down completely randomly.

Pair Corralation between Empiric 2500 and Balanced Fund

Assuming the 90 days horizon Empiric 2500 Fund is expected to generate 1.63 times more return on investment than Balanced Fund. However, Empiric 2500 is 1.63 times more volatile than Balanced Fund Investor. It trades about 0.09 of its potential returns per unit of risk. Balanced Fund Investor is currently generating about 0.11 per unit of risk. If you would invest  5,305  in Empiric 2500 Fund on October 5, 2024 and sell it today you would earn a total of  1,341  from holding Empiric 2500 Fund or generate 25.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.68%
Values	Daily Returns

Empiric 2500 Fund  vs.  Balanced Fund Investor

Empiric 2500

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Empiric 2500 Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Empiric 2500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Balanced Fund Investor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Empiric 2500 and Balanced Fund

The main advantage of trading using opposite Empiric 2500 and Balanced Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empiric 2500 position performs unexpectedly, Balanced Fund 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 Balanced Fund will offset losses from the drop in Balanced Fund's long position.

The idea behind Empiric 2500 Fund and Balanced Fund Investor 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.