Correlation Between Automotive Portfolio and Transportation Fund

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

By analyzing existing cross correlation between Automotive Portfolio Automotive and Transportation Fund Investor, you can compare the effects of market volatilities on Automotive Portfolio and Transportation 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 Automotive Portfolio with a short position of Transportation Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automotive Portfolio and Transportation Fund.

Diversification Opportunities for Automotive Portfolio and Transportation Fund

0.94

Correlation Coefficient

Automotive Portfolio  Transportation Fund

Almost no diversification

The 3 months correlation between Automotive and Transportation is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Automotive Portfolio Automotiv and Transportation Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportation Fund and Automotive Portfolio 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 Automotive Portfolio Automotive are associated (or correlated) with Transportation Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportation Fund has no effect on the direction of Automotive Portfolio i.e., Automotive Portfolio and Transportation Fund go up and down completely randomly.

Pair Corralation between Automotive Portfolio and Transportation Fund

Assuming the 90 days horizon Automotive Portfolio Automotive is expected to generate 0.93 times more return on investment than Transportation Fund. However, Automotive Portfolio Automotive is 1.08 times less risky than Transportation Fund. It trades about -0.07 of its potential returns per unit of risk. Transportation Fund Investor is currently generating about -0.17 per unit of risk. If you would invest  5,661  in Automotive Portfolio Automotive on October 4, 2024 and sell it today you would lose (96.00) from holding Automotive Portfolio Automotive or give up 1.7% of portfolio value over 90 days.

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

Automotive Portfolio Automotiv  vs.  Transportation Fund Investor

Automotive Portfolio

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Automotive Portfolio Automotive are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Automotive Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transportation Fund

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transportation Fund Investor are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Transportation 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 Automotive Portfolio and Transportation Fund

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

The idea behind Automotive Portfolio Automotive and Transportation Fund Investor 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.