Correlation Between Balanced Fund and Inverse Sp

Can any of the company-specific risk be diversified away by investing in both Balanced Fund and Inverse Sp 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 Inverse Sp 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 Inverse Sp 500, you can compare the effects of market volatilities on Balanced Fund and Inverse Sp 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 Inverse Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Inverse Sp.

Diversification Opportunities for Balanced Fund and Inverse Sp

-0.96

Correlation Coefficient

Balanced Fund  Inverse Sp

Pay attention - limited upside

The 3 months correlation between Balanced and Inverse is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Retail and Inverse Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Sp 500 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 Inverse Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Sp 500 has no effect on the direction of Balanced Fund i.e., Balanced Fund and Inverse Sp go up and down completely randomly.

Pair Corralation between Balanced Fund and Inverse Sp

Assuming the 90 days horizon Balanced Fund Retail is expected to under-perform the Inverse Sp. But the mutual fund apears to be less risky and, when comparing its historical volatility, Balanced Fund Retail is 2.91 times less risky than Inverse Sp. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Inverse Sp 500 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  8,730  in Inverse Sp 500 on December 30, 2024 and sell it today you would earn a total of  1,063  from holding Inverse Sp 500 or generate 12.18% return on investment over 90 days.

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

Balanced Fund Retail  vs.  Inverse Sp 500

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.

Inverse Sp 500

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Sp 500 are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Inverse Sp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Balanced Fund and Inverse Sp

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

The idea behind Balanced Fund Retail and Inverse Sp 500 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.