Correlation Between Rational Defensive and Investment Managers

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

Diversification Opportunities for Rational Defensive and Investment Managers

-0.49

Correlation Coefficient

Rational Defensive  Investment Managers

Very good diversification

The 3 months correlation between Rational and Investment is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Investment Managers Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Managers 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 Investment Managers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Managers has no effect on the direction of Rational Defensive i.e., Rational Defensive and Investment Managers go up and down completely randomly.

Pair Corralation between Rational Defensive and Investment Managers

Assuming the 90 days horizon Rational Defensive Growth is expected to generate 0.55 times more return on investment than Investment Managers. However, Rational Defensive Growth is 1.83 times less risky than Investment Managers. It trades about -0.15 of its potential returns per unit of risk. Investment Managers Series is currently generating about -0.15 per unit of risk. If you would invest  4,127  in Rational Defensive Growth on October 8, 2024 and sell it today you would lose (133.00) from holding Rational Defensive Growth or give up 3.22% of portfolio value over 90 days.

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

Rational Defensive Growth  vs.  Investment Managers Series

Rational Defensive Growth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Defensive Growth are ranked lower than 8 (%) 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 February 2025.

Investment Managers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investment Managers Series has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Rational Defensive and Investment Managers

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

The idea behind Rational Defensive Growth and Investment Managers Series 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..