Correlation Between Ambassador Fund and Diplomat

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

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

Diversification Opportunities for Ambassador Fund and Diplomat

0.74

Correlation Coefficient

Ambassador Fund  Diplomat

Poor diversification

The 3 months correlation between Ambassador and Diplomat is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ambassador Fund and The Diplomat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diplomat and Ambassador 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 Ambassador Fund are associated (or correlated) with Diplomat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diplomat has no effect on the direction of Ambassador Fund i.e., Ambassador Fund and Diplomat go up and down completely randomly.

Pair Corralation between Ambassador Fund and Diplomat

Assuming the 90 days horizon Ambassador Fund is expected to generate 3.94 times less return on investment than Diplomat. But when comparing it to its historical volatility, Ambassador Fund is 5.72 times less risky than Diplomat. It trades about 0.14 of its potential returns per unit of risk. The Diplomat is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  939.00  in The Diplomat on December 23, 2024 and sell it today you would earn a total of  33.00  from holding The Diplomat or generate 3.51% return on investment over 90 days.

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

Ambassador Fund  vs.  The Diplomat

Ambassador Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ambassador Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ambassador Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Diplomat

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Diplomat are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Diplomat is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ambassador Fund and Diplomat

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

The idea behind Ambassador Fund and The Diplomat 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.