Correlation Between Frost Low and Edgewood Growth

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

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

Diversification Opportunities for Frost Low and Edgewood Growth

-0.35

Correlation Coefficient

Frost Low  Edgewood Growth

Very good diversification

The 3 months correlation between Frost and Edgewood is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Frost Low Duration and Edgewood Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewood Growth and Frost Low 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 Frost Low Duration are associated (or correlated) with Edgewood Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewood Growth has no effect on the direction of Frost Low i.e., Frost Low and Edgewood Growth go up and down completely randomly.

Pair Corralation between Frost Low and Edgewood Growth

Assuming the 90 days horizon Frost Low Duration is expected to generate 0.09 times more return on investment than Edgewood Growth. However, Frost Low Duration is 10.56 times less risky than Edgewood Growth. It trades about 0.24 of its potential returns per unit of risk. Edgewood Growth Fund is currently generating about -0.05 per unit of risk. If you would invest  973.00  in Frost Low Duration on December 27, 2024 and sell it today you would earn a total of  17.00  from holding Frost Low Duration or generate 1.75% return on investment over 90 days.

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

Frost Low Duration  vs.  Edgewood Growth Fund

Frost Low Duration

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Frost Low Duration are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Frost Low is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Edgewood Growth

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Frost Low and Edgewood Growth

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

The idea behind Frost Low Duration and Edgewood Growth 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.