Correlation Between Balanced Fund and Income Fund

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

By analyzing existing cross correlation between Balanced Fund Institutional and Income Fund Institutional, you can compare the effects of market volatilities on Balanced Fund and Income 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 Income Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Income Fund.

Diversification Opportunities for Balanced Fund and Income Fund

-0.47

Correlation Coefficient

Balanced Fund  Income Fund

Very good diversification

The 3 months correlation between Balanced and Income is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Institutional and Income Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund Institutional 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 Institutional are associated (or correlated) with Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund Institutional has no effect on the direction of Balanced Fund i.e., Balanced Fund and Income Fund go up and down completely randomly.

Pair Corralation between Balanced Fund and Income Fund

Assuming the 90 days horizon Balanced Fund Institutional is expected to under-perform the Income Fund. In addition to that, Balanced Fund is 2.05 times more volatile than Income Fund Institutional. It trades about -0.08 of its total potential returns per unit of risk. Income Fund Institutional is currently generating about 0.13 per unit of volatility. If you would invest  900.00  in Income Fund Institutional on December 30, 2024 and sell it today you would earn a total of  22.00  from holding Income Fund Institutional or generate 2.44% return on investment over 90 days.

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

Balanced Fund Institutional  vs.  Income Fund Institutional

Balanced Fund Instit

Risk-Adjusted Performance

Very Weak

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

Income Fund Institutional

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Income Fund Institutional are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Income Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Balanced Fund and Income Fund

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

The idea behind Balanced Fund Institutional and Income Fund Institutional 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.