Correlation Between Quantitative and Real Assets

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

By analyzing existing cross correlation between Quantitative U S and Real Assets Portfolio, you can compare the effects of market volatilities on Quantitative and Real Assets 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 Quantitative with a short position of Real Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quantitative and Real Assets.

Diversification Opportunities for Quantitative and Real Assets

0.81

Correlation Coefficient

Quantitative  Real Assets

Very poor diversification

The 3 months correlation between Quantitative and Real is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Quantitative U S and Real Assets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Assets Portfolio and Quantitative 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 Quantitative U S are associated (or correlated) with Real Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Assets Portfolio has no effect on the direction of Quantitative i.e., Quantitative and Real Assets go up and down completely randomly.

Pair Corralation between Quantitative and Real Assets

Assuming the 90 days horizon Quantitative U S is expected to under-perform the Real Assets. In addition to that, Quantitative is 1.26 times more volatile than Real Assets Portfolio. It trades about -0.31 of its total potential returns per unit of risk. Real Assets Portfolio is currently generating about -0.28 per unit of volatility. If you would invest  1,113  in Real Assets Portfolio on October 6, 2024 and sell it today you would lose (135.00) from holding Real Assets Portfolio or give up 12.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Quantitative U S  vs.  Real Assets Portfolio

Quantitative U S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quantitative U S has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Real Assets Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Assets Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Quantitative and Real Assets

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

The idea behind Quantitative U S and Real Assets Portfolio 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.