Correlation Between Rational Defensive and Eic Value

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

Diversification Opportunities for Rational Defensive and Eic Value

-0.55

Correlation Coefficient

Rational Defensive  Eic Value

Excellent diversification

The 3 months correlation between Rational and Eic is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Eic Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eic Value Fund 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 Eic Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eic Value Fund has no effect on the direction of Rational Defensive i.e., Rational Defensive and Eic Value go up and down completely randomly.

Pair Corralation between Rational Defensive and Eic Value

Assuming the 90 days horizon Rational Defensive Growth is expected to generate 0.79 times more return on investment than Eic Value. However, Rational Defensive Growth is 1.27 times less risky than Eic Value. It trades about 0.11 of its potential returns per unit of risk. Eic Value Fund is currently generating about -0.1 per unit of risk. If you would invest  6,200  in Rational Defensive Growth on October 8, 2024 and sell it today you would earn a total of  405.00  from holding Rational Defensive Growth or generate 6.53% return on investment over 90 days.

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

Rational Defensive Growth  vs.  Eic Value Fund

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.

Eic Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eic Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental 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 Eic Value

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

The idea behind Rational Defensive Growth and Eic Value Fund 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.