Correlation Between Jensen Portfolio and Financials Ultrasector
Can any of the company-specific risk be diversified away by investing in both Jensen Portfolio and Financials Ultrasector 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 Jensen Portfolio and Financials Ultrasector into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Jensen Portfolio and Financials Ultrasector Profund, you can compare the effects of market volatilities on Jensen Portfolio and Financials Ultrasector 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 Jensen Portfolio with a short position of Financials Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jensen Portfolio and Financials Ultrasector.
Diversification Opportunities for Jensen Portfolio and Financials Ultrasector
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Jensen and Financials is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding The Jensen Portfolio and Financials Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financials Ultrasector and Jensen Portfolio 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 The Jensen Portfolio are associated (or correlated) with Financials Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financials Ultrasector has no effect on the direction of Jensen Portfolio i.e., Jensen Portfolio and Financials Ultrasector go up and down completely randomly.
Pair Corralation between Jensen Portfolio and Financials Ultrasector
Assuming the 90 days horizon The Jensen Portfolio is expected to under-perform the Financials Ultrasector. But the mutual fund apears to be less risky and, when comparing its historical volatility, The Jensen Portfolio is 2.54 times less risky than Financials Ultrasector. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Financials Ultrasector Profund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,028 in Financials Ultrasector Profund on October 11, 2024 and sell it today you would earn a total of 133.00 from holding Financials Ultrasector Profund or generate 3.3% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
The Jensen Portfolio vs. Financials Ultrasector Profund
Performance |
Timeline |
Jensen Portfolio |
Financials Ultrasector |
Jensen Portfolio and Financials Ultrasector Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Jensen Portfolio and Financials Ultrasector
The main advantage of trading using opposite Jensen Portfolio and Financials Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jensen Portfolio position performs unexpectedly, Financials Ultrasector 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 Financials Ultrasector will offset losses from the drop in Financials Ultrasector's long position.Jensen Portfolio vs. Tax Managed Mid Small | Jensen Portfolio vs. Stone Ridge Diversified | Jensen Portfolio vs. Tiaa Cref Small Cap Blend | Jensen Portfolio vs. Fulcrum Diversified Absolute |
Check out your portfolio center.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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