Correlation Between Rational Real and Catalyst/millburn

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

By analyzing existing cross correlation between Rational Real Strategies and Catalystmillburn Hedge Strategy, you can compare the effects of market volatilities on Rational Real and Catalyst/millburn 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 Rational Real with a short position of Catalyst/millburn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Real and Catalyst/millburn.

Diversification Opportunities for Rational Real and Catalyst/millburn

0.13

Correlation Coefficient

Rational Real  Catalyst/millburn

Average diversification

The 3 months correlation between RATIONAL and Catalyst/millburn is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Rational Real Strategies and Catalystmillburn Hedge Strateg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystmillburn Hedge and Rational Real 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 Rational Real Strategies are associated (or correlated) with Catalyst/millburn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystmillburn Hedge has no effect on the direction of Rational Real i.e., Rational Real and Catalyst/millburn go up and down completely randomly.

Pair Corralation between Rational Real and Catalyst/millburn

Assuming the 90 days horizon Rational Real Strategies is expected to generate 0.26 times more return on investment than Catalyst/millburn. However, Rational Real Strategies is 3.85 times less risky than Catalyst/millburn. It trades about 0.01 of its potential returns per unit of risk. Catalystmillburn Hedge Strategy is currently generating about -0.08 per unit of risk. If you would invest  1,683  in Rational Real Strategies on December 2, 2024 and sell it today you would earn a total of  1.00  from holding Rational Real Strategies or generate 0.06% return on investment over 90 days.

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

Rational Real Strategies  vs.  Catalystmillburn Hedge Strateg

Rational Real Strategies

Risk-Adjusted Performance

Very Weak

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

Catalystmillburn Hedge

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Rational Real and Catalyst/millburn

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

The idea behind Rational Real Strategies and Catalystmillburn Hedge Strategy 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.