Correlation Between Utilities Portfolio and Frost Kempner

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

By analyzing existing cross correlation between Utilities Portfolio Utilities and Frost Kempner Multi Cap, you can compare the effects of market volatilities on Utilities Portfolio and Frost Kempner 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 Utilities Portfolio with a short position of Frost Kempner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Utilities Portfolio and Frost Kempner.

Diversification Opportunities for Utilities Portfolio and Frost Kempner

0.76

Correlation Coefficient

Utilities Portfolio  Frost Kempner

Poor diversification

The 3 months correlation between Utilities and Frost is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Portfolio Utilities and Frost Kempner Multi Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frost Kempner Multi and Utilities 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 Utilities Portfolio Utilities are associated (or correlated) with Frost Kempner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frost Kempner Multi has no effect on the direction of Utilities Portfolio i.e., Utilities Portfolio and Frost Kempner go up and down completely randomly.

Pair Corralation between Utilities Portfolio and Frost Kempner

Assuming the 90 days horizon Utilities Portfolio Utilities is expected to generate 1.07 times more return on investment than Frost Kempner. However, Utilities Portfolio is 1.07 times more volatile than Frost Kempner Multi Cap. It trades about -0.06 of its potential returns per unit of risk. Frost Kempner Multi Cap is currently generating about -0.11 per unit of risk. If you would invest  13,008  in Utilities Portfolio Utilities on December 5, 2024 and sell it today you would lose (587.00) from holding Utilities Portfolio Utilities or give up 4.51% of portfolio value over 90 days.

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

Utilities Portfolio Utilities  vs.  Frost Kempner Multi Cap

Utilities Portfolio

Risk-Adjusted Performance

Very Weak

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

Frost Kempner Multi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Frost Kempner Multi Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental 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 Utilities Portfolio and Frost Kempner

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

The idea behind Utilities Portfolio Utilities and Frost Kempner Multi Cap 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 CEOs Directory module to screen CEOs from public companies around the world.