Correlation Between Frost Kempner and Edgewood Growth

Can any of the company-specific risk be diversified away by investing in both Frost Kempner 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 Kempner 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 Kempner Multi Cap and Edgewood Growth Fund, you can compare the effects of market volatilities on Frost Kempner 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 Kempner with a short position of Edgewood Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frost Kempner and Edgewood Growth.

Diversification Opportunities for Frost Kempner and Edgewood Growth

0.86

Correlation Coefficient

Frost Kempner  Edgewood Growth

Very poor diversification

The 3 months correlation between Frost and Edgewood is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Frost Kempner Multi Cap 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 Kempner 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 Kempner Multi Cap 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 Kempner i.e., Frost Kempner and Edgewood Growth go up and down completely randomly.

Pair Corralation between Frost Kempner and Edgewood Growth

Assuming the 90 days horizon Frost Kempner is expected to generate 1.77 times less return on investment than Edgewood Growth. But when comparing it to its historical volatility, Frost Kempner Multi Cap is 1.52 times less risky than Edgewood Growth. It trades about 0.09 of its potential returns per unit of risk. Edgewood Growth Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,677  in Edgewood Growth Fund on September 17, 2024 and sell it today you would earn a total of  301.00  from holding Edgewood Growth Fund or generate 6.44% return on investment over 90 days.

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

Frost Kempner Multi Cap  vs.  Edgewood Growth Fund

Frost Kempner Multi

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Frost Kempner Multi Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Frost Kempner 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

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Edgewood Growth Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Edgewood Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Frost Kempner and Edgewood Growth

The main advantage of trading using opposite Frost Kempner and Edgewood Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frost Kempner 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 Kempner Multi Cap 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.