Correlation Between Rational Defensive and Holbrook Structured

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

Diversification Opportunities for Rational Defensive and Holbrook Structured

0.71

Correlation Coefficient

Rational Defensive  Holbrook Structured

Poor diversification

The 3 months correlation between Rational and Holbrook is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Holbrook Structured Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holbrook Structured 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 Holbrook Structured. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holbrook Structured has no effect on the direction of Rational Defensive i.e., Rational Defensive and Holbrook Structured go up and down completely randomly.

Pair Corralation between Rational Defensive and Holbrook Structured

Assuming the 90 days horizon Rational Defensive Growth is expected to generate 5.48 times more return on investment than Holbrook Structured. However, Rational Defensive is 5.48 times more volatile than Holbrook Structured Income. It trades about 0.1 of its potential returns per unit of risk. Holbrook Structured Income is currently generating about 0.19 per unit of risk. If you would invest  4,008  in Rational Defensive Growth on October 8, 2024 and sell it today you would earn a total of  2,597  from holding Rational Defensive Growth or generate 64.8% 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.  Holbrook Structured Income

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.

Holbrook Structured

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Holbrook Structured Income are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Holbrook Structured 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 Holbrook Structured

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

The idea behind Rational Defensive Growth and Holbrook Structured Income 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.