Correlation Between Balanced Fund and Essex Environmental

Can any of the company-specific risk be diversified away by investing in both Balanced Fund and Essex Environmental 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 Essex Environmental 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 Essex Environmental Opportunities, you can compare the effects of market volatilities on Balanced Fund and Essex Environmental 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 Essex Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Essex Environmental.

Diversification Opportunities for Balanced Fund and Essex Environmental

0.91

Correlation Coefficient

Balanced Fund  Essex Environmental

Almost no diversification

The 3 months correlation between Balanced and Essex is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Retail and Essex Environmental Opportunit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essex Environmental 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 Essex Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essex Environmental has no effect on the direction of Balanced Fund i.e., Balanced Fund and Essex Environmental go up and down completely randomly.

Pair Corralation between Balanced Fund and Essex Environmental

Assuming the 90 days horizon Balanced Fund is expected to generate 2.74 times less return on investment than Essex Environmental. But when comparing it to its historical volatility, Balanced Fund Retail is 2.1 times less risky than Essex Environmental. It trades about 0.1 of its potential returns per unit of risk. Essex Environmental Opportunities is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,309  in Essex Environmental Opportunities on September 3, 2024 and sell it today you would earn a total of  122.00  from holding Essex Environmental Opportunities or generate 9.32% return on investment over 90 days.

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

Balanced Fund Retail  vs.  Essex Environmental Opportunit

Balanced Fund Retail

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Retail are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. 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.

Essex Environmental

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Essex Environmental Opportunities are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Essex Environmental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Balanced Fund and Essex Environmental

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

The idea behind Balanced Fund Retail and Essex Environmental Opportunities 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.