Correlation Between Salient Tactical and Salient Select

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

By analyzing existing cross correlation between Salient Tactical Growth and Salient Select Income, you can compare the effects of market volatilities on Salient Tactical and Salient Select 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 Salient Tactical with a short position of Salient Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salient Tactical and Salient Select.

Diversification Opportunities for Salient Tactical and Salient Select

0.47

Correlation Coefficient

Salient Tactical  Salient Select

Very weak diversification

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

Pair Corralation between Salient Tactical and Salient Select

Assuming the 90 days horizon Salient Tactical Growth is expected to generate 0.97 times more return on investment than Salient Select. However, Salient Tactical Growth is 1.03 times less risky than Salient Select. It trades about 0.2 of its potential returns per unit of risk. Salient Select Income is currently generating about 0.13 per unit of risk. If you would invest  2,672  in Salient Tactical Growth on September 5, 2024 and sell it today you would earn a total of  136.00  from holding Salient Tactical Growth or generate 5.09% return on investment over 90 days.

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

Salient Tactical Growth  vs.  Salient Select Income

Salient Tactical Growth

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salient Tactical Growth are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Salient Tactical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Salient Select Income

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Salient Tactical and Salient Select

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

The idea behind Salient Tactical Growth and Salient Select Income 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.