Correlation Between Eventide Gilead and Smead Value

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

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

Diversification Opportunities for Eventide Gilead and Smead Value

0.92

Correlation Coefficient

Eventide Gilead  Smead Value

Almost no diversification

The 3 months correlation between Eventide and Smead is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Eventide Gilead Fund and Smead Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smead Value Fund and Eventide Gilead 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 Eventide Gilead Fund are associated (or correlated) with Smead Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smead Value Fund has no effect on the direction of Eventide Gilead i.e., Eventide Gilead and Smead Value go up and down completely randomly.

Pair Corralation between Eventide Gilead and Smead Value

Assuming the 90 days horizon Eventide Gilead Fund is expected to under-perform the Smead Value. In addition to that, Eventide Gilead is 1.57 times more volatile than Smead Value Fund. It trades about -0.05 of its total potential returns per unit of risk. Smead Value Fund is currently generating about -0.06 per unit of volatility. If you would invest  7,959  in Smead Value Fund on December 29, 2024 and sell it today you would lose (279.00) from holding Smead Value Fund or give up 3.51% of portfolio value over 90 days.

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

Eventide Gilead Fund  vs.  Smead Value Fund

Eventide Gilead

Risk-Adjusted Performance

Very Weak

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

Smead Value Fund

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Eventide Gilead and Smead Value

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

The idea behind Eventide Gilead Fund and Smead Value Fund 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.