Correlation Between Rational Defensive and Campbell Systematic

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

Diversification Opportunities for Rational Defensive and Campbell Systematic

0.61

Correlation Coefficient

Rational Defensive  Campbell Systematic

Poor diversification

The 3 months correlation between Rational and Campbell is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Campbell Systematic Macro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Campbell Systematic Macro 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 Campbell Systematic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Campbell Systematic Macro has no effect on the direction of Rational Defensive i.e., Rational Defensive and Campbell Systematic go up and down completely randomly.

Pair Corralation between Rational Defensive and Campbell Systematic

Assuming the 90 days horizon Rational Defensive is expected to generate 3.46 times less return on investment than Campbell Systematic. In addition to that, Rational Defensive is 1.96 times more volatile than Campbell Systematic Macro. It trades about 0.03 of its total potential returns per unit of risk. Campbell Systematic Macro is currently generating about 0.18 per unit of volatility. If you would invest  939.00  in Campbell Systematic Macro on September 24, 2024 and sell it today you would earn a total of  18.00  from holding Campbell Systematic Macro or generate 1.92% return on investment over 90 days.

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

Rational Defensive Growth  vs.  Campbell Systematic Macro

Rational Defensive Growth

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Defensive Growth are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rational Defensive may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Campbell Systematic Macro

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Campbell Systematic Macro has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Campbell Systematic 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 Campbell Systematic

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

The idea behind Rational Defensive Growth and Campbell Systematic Macro 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.