Correlation Between Matson Money and Sierra Tactical

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

By analyzing existing cross correlation between Matson Money Equity and Sierra Tactical Bond, you can compare the effects of market volatilities on Matson Money and Sierra Tactical 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 Matson Money with a short position of Sierra Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matson Money and Sierra Tactical.

Diversification Opportunities for Matson Money and Sierra Tactical

-0.25

Correlation Coefficient

Matson Money  Sierra Tactical

Very good diversification

The 3 months correlation between Matson and Sierra is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Matson Money Equity and Sierra Tactical Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Tactical Bond and Matson Money 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 Matson Money Equity are associated (or correlated) with Sierra Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Tactical Bond has no effect on the direction of Matson Money i.e., Matson Money and Sierra Tactical go up and down completely randomly.

Pair Corralation between Matson Money and Sierra Tactical

Assuming the 90 days horizon Matson Money Equity is expected to under-perform the Sierra Tactical. In addition to that, Matson Money is 4.68 times more volatile than Sierra Tactical Bond. It trades about -0.08 of its total potential returns per unit of risk. Sierra Tactical Bond is currently generating about 0.07 per unit of volatility. If you would invest  2,591  in Sierra Tactical Bond on December 29, 2024 and sell it today you would earn a total of  23.00  from holding Sierra Tactical Bond or generate 0.89% return on investment over 90 days.

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

Matson Money Equity  vs.  Sierra Tactical Bond

Matson Money Equity

Risk-Adjusted Performance

Very Weak

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

Sierra Tactical Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sierra Tactical Bond are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Sierra Tactical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Matson Money and Sierra Tactical

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

The idea behind Matson Money Equity and Sierra Tactical Bond 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.