Correlation Between Fulcrum Diversified and Active M

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

By analyzing existing cross correlation between Fulcrum Diversified Absolute and Active M International, you can compare the effects of market volatilities on Fulcrum Diversified and Active M 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 Fulcrum Diversified with a short position of Active M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fulcrum Diversified and Active M.

Diversification Opportunities for Fulcrum Diversified and Active M

0.14

Correlation Coefficient

Fulcrum Diversified  Active M

Average diversification

The 3 months correlation between Fulcrum and Active is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Fulcrum Diversified Absolute and Active M International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Active M International and Fulcrum Diversified 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 Fulcrum Diversified Absolute are associated (or correlated) with Active M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Active M International has no effect on the direction of Fulcrum Diversified i.e., Fulcrum Diversified and Active M go up and down completely randomly.

Pair Corralation between Fulcrum Diversified and Active M

Assuming the 90 days horizon Fulcrum Diversified Absolute is expected to under-perform the Active M. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fulcrum Diversified Absolute is 2.58 times less risky than Active M. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Active M International is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,061  in Active M International on December 20, 2024 and sell it today you would earn a total of  139.00  from holding Active M International or generate 13.1% return on investment over 90 days.

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

Fulcrum Diversified Absolute  vs.  Active M International

Fulcrum Diversified

Risk-Adjusted Performance

Very Weak

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

Active M International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Active M International are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Active M showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fulcrum Diversified and Active M

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

The idea behind Fulcrum Diversified Absolute and Active M International 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.