Correlation Between Value Fund and Homestead Intermediate

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

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

Diversification Opportunities for Value Fund and Homestead Intermediate

0.14

Correlation Coefficient

Value Fund  Homestead Intermediate

Average diversification

The 3 months correlation between Value and Homestead is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Value and Homestead Intermediate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homestead Intermediate and Value Fund 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 Value Fund Value are associated (or correlated) with Homestead Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homestead Intermediate has no effect on the direction of Value Fund i.e., Value Fund and Homestead Intermediate go up and down completely randomly.

Pair Corralation between Value Fund and Homestead Intermediate

Assuming the 90 days horizon Value Fund is expected to generate 3.13 times less return on investment than Homestead Intermediate. In addition to that, Value Fund is 2.7 times more volatile than Homestead Intermediate Bond. It trades about 0.01 of its total potential returns per unit of risk. Homestead Intermediate Bond is currently generating about 0.11 per unit of volatility. If you would invest  449.00  in Homestead Intermediate Bond on December 29, 2024 and sell it today you would earn a total of  9.00  from holding Homestead Intermediate Bond or generate 2.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Value Fund Value  vs.  Homestead Intermediate Bond

Value Fund Value

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund Value are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Value Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Homestead Intermediate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Homestead Intermediate Bond are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Homestead Intermediate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Value Fund and Homestead Intermediate

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

The idea behind Value Fund Value and Homestead Intermediate Bond 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.