Correlation Between Retailing Portfolio and Leisure Fund

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

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

Diversification Opportunities for Retailing Portfolio and Leisure Fund

0.84

Correlation Coefficient

Retailing Portfolio  Leisure Fund

Very poor diversification

The 3 months correlation between Retailing and Leisure is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Retailing Portfolio Retailing and Leisure Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leisure Fund Class and Retailing 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 Retailing Portfolio Retailing are associated (or correlated) with Leisure Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leisure Fund Class has no effect on the direction of Retailing Portfolio i.e., Retailing Portfolio and Leisure Fund go up and down completely randomly.

Pair Corralation between Retailing Portfolio and Leisure Fund

Assuming the 90 days horizon Retailing Portfolio is expected to generate 2.42 times less return on investment than Leisure Fund. In addition to that, Retailing Portfolio is 1.35 times more volatile than Leisure Fund Class. It trades about 0.02 of its total potential returns per unit of risk. Leisure Fund Class is currently generating about 0.08 per unit of volatility. If you would invest  6,941  in Leisure Fund Class on October 5, 2024 and sell it today you would earn a total of  1,334  from holding Leisure Fund Class or generate 19.22% return on investment over 90 days.

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

Retailing Portfolio Retailing  vs.  Leisure Fund Class

Retailing Portfolio

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Retailing Portfolio Retailing are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Retailing Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Leisure Fund Class

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leisure Fund Class are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Leisure 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 Retailing Portfolio and Leisure Fund

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

The idea behind Retailing Portfolio Retailing and Leisure Fund Class 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.