Correlation Between Classic Value and Intech Managed

Can any of the company-specific risk be diversified away by investing in both Classic Value and Intech Managed 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 Classic Value and Intech Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Classic Value Fund and Intech Managed Volatility, you can compare the effects of market volatilities on Classic Value and Intech Managed 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 Classic Value with a short position of Intech Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Classic Value and Intech Managed.

Diversification Opportunities for Classic Value and Intech Managed

0.32

Correlation Coefficient

Classic Value  Intech Managed

Weak diversification

The 3 months correlation between Classic and Intech is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Classic Value Fund and Intech Managed Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intech Managed Volatility and Classic Value 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 Classic Value Fund are associated (or correlated) with Intech Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intech Managed Volatility has no effect on the direction of Classic Value i.e., Classic Value and Intech Managed go up and down completely randomly.

Pair Corralation between Classic Value and Intech Managed

Assuming the 90 days horizon Classic Value Fund is expected to under-perform the Intech Managed. In addition to that, Classic Value is 3.71 times more volatile than Intech Managed Volatility. It trades about -0.07 of its total potential returns per unit of risk. Intech Managed Volatility is currently generating about 0.09 per unit of volatility. If you would invest  1,116  in Intech Managed Volatility on September 26, 2024 and sell it today you would earn a total of  104.00  from holding Intech Managed Volatility or generate 9.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Classic Value Fund  vs.  Intech Managed Volatility

Classic Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Classic Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Intech Managed Volatility

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Intech Managed Volatility are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Intech Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Classic Value and Intech Managed

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

The idea behind Classic Value Fund and Intech Managed Volatility 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.