Correlation Between Quantitative and Strategic Equity

Can any of the company-specific risk be diversified away by investing in both Quantitative and Strategic Equity 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 Strategic Equity 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 Strategic Equity Portfolio, you can compare the effects of market volatilities on Quantitative and Strategic Equity 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 Strategic Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quantitative and Strategic Equity.

Diversification Opportunities for Quantitative and Strategic Equity

0.93

Correlation Coefficient

Quantitative  Strategic Equity

Almost no diversification

The 3 months correlation between Quantitative and Strategic is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Quantitative U S and Strategic Equity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Equity Por 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 Strategic Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Equity Por has no effect on the direction of Quantitative i.e., Quantitative and Strategic Equity go up and down completely randomly.

Pair Corralation between Quantitative and Strategic Equity

Assuming the 90 days horizon Quantitative is expected to generate 1.07 times less return on investment than Strategic Equity. In addition to that, Quantitative is 1.92 times more volatile than Strategic Equity Portfolio. It trades about 0.08 of its total potential returns per unit of risk. Strategic Equity Portfolio is currently generating about 0.17 per unit of volatility. If you would invest  2,937  in Strategic Equity Portfolio on September 13, 2024 and sell it today you would earn a total of  212.00  from holding Strategic Equity Portfolio or generate 7.22% return on investment over 90 days.

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

Quantitative U S  vs.  Strategic Equity Portfolio

Quantitative U S

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Quantitative U S are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Quantitative may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Strategic Equity Por

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Equity Portfolio are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Strategic Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Quantitative and Strategic Equity

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

The idea behind Quantitative U S and Strategic Equity 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.