Correlation Between Rational Defensive and Ishares Sp

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

By analyzing existing cross correlation between Rational Defensive Growth and Ishares Sp 500, you can compare the effects of market volatilities on Rational Defensive and Ishares Sp 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 Defensive with a short position of Ishares Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Defensive and Ishares Sp.

Diversification Opportunities for Rational Defensive and Ishares Sp

0.93

Correlation Coefficient

Rational Defensive  Ishares Sp

Almost no diversification

The 3 months correlation between Rational and Ishares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Ishares Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ishares Sp 500 and Rational Defensive 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 Defensive Growth are associated (or correlated) with Ishares Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ishares Sp 500 has no effect on the direction of Rational Defensive i.e., Rational Defensive and Ishares Sp go up and down completely randomly.

Pair Corralation between Rational Defensive and Ishares Sp

Assuming the 90 days horizon Rational Defensive Growth is expected to under-perform the Ishares Sp. In addition to that, Rational Defensive is 1.09 times more volatile than Ishares Sp 500. It trades about -0.15 of its total potential returns per unit of risk. Ishares Sp 500 is currently generating about -0.13 per unit of volatility. If you would invest  70,934  in Ishares Sp 500 on October 9, 2024 and sell it today you would lose (1,890) from holding Ishares Sp 500 or give up 2.66% of portfolio value over 90 days.

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

Rational Defensive Growth  vs.  Ishares Sp 500

Rational Defensive Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Defensive Growth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Rational Defensive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ishares Sp 500

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares Sp 500 are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ishares Sp 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 Defensive and Ishares Sp

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

The idea behind Rational Defensive Growth and Ishares Sp 500 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.