Correlation Between Balanced Fund and Short Oil

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

Diversification Opportunities for Balanced Fund and Short Oil

-0.11

Correlation Coefficient

Balanced Fund  Short Oil

Good diversification

The 3 months correlation between Balanced and Short is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Institutional and Short Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Oil Gas 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 Short Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Oil Gas has no effect on the direction of Balanced Fund i.e., Balanced Fund and Short Oil go up and down completely randomly.

Pair Corralation between Balanced Fund and Short Oil

Assuming the 90 days horizon Balanced Fund Institutional is expected to generate 0.49 times more return on investment than Short Oil. However, Balanced Fund Institutional is 2.04 times less risky than Short Oil. It trades about -0.07 of its potential returns per unit of risk. Short Oil Gas is currently generating about -0.11 per unit of risk. If you would invest  1,956  in Balanced Fund Institutional on December 29, 2024 and sell it today you would lose (54.00) from holding Balanced Fund Institutional or give up 2.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Balanced Fund Institutional  vs.  Short Oil Gas

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.

Short Oil Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Short Oil Gas has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Short Oil

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

The idea behind Balanced Fund Institutional and Short Oil Gas 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.