Correlation Between Balanced Fund and Heritage Fund

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

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

Diversification Opportunities for Balanced Fund and Heritage Fund

0.93

Correlation Coefficient

Balanced Fund  Heritage Fund

Almost no diversification

The 3 months correlation between Balanced and Heritage is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Retail and Heritage Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Fund A and Balanced 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 Balanced Fund Retail are associated (or correlated) with Heritage Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Fund A has no effect on the direction of Balanced Fund i.e., Balanced Fund and Heritage Fund go up and down completely randomly.

Pair Corralation between Balanced Fund and Heritage Fund

Assuming the 90 days horizon Balanced Fund Retail is expected to generate 0.43 times more return on investment than Heritage Fund. However, Balanced Fund Retail is 2.32 times less risky than Heritage Fund. It trades about -0.06 of its potential returns per unit of risk. Heritage Fund A is currently generating about -0.08 per unit of risk. If you would invest  1,253  in Balanced Fund Retail on December 30, 2024 and sell it today you would lose (35.00) from holding Balanced Fund Retail or give up 2.79% of portfolio value over 90 days.

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

Balanced Fund Retail  vs.  Heritage Fund A

Balanced Fund Retail

Risk-Adjusted Performance

Very Weak

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

Heritage Fund A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heritage Fund A has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Balanced Fund and Heritage Fund

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

The idea behind Balanced Fund Retail and Heritage Fund A 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.

Check out your portfolio center.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.