Correlation Between Equity Income and Counterpoint Tactical

Can any of the company-specific risk be diversified away by investing in both Equity Income and Counterpoint Tactical 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 Equity Income and Counterpoint Tactical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Equity Income Fund and Counterpoint Tactical Income, you can compare the effects of market volatilities on Equity Income and Counterpoint Tactical 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 Equity Income with a short position of Counterpoint Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Income and Counterpoint Tactical.

Diversification Opportunities for Equity Income and Counterpoint Tactical

0.77

Correlation Coefficient

Equity Income  Counterpoint Tactical

Poor diversification

The 3 months correlation between Equity and Counterpoint is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Equity Income Fund and Counterpoint Tactical Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Counterpoint Tactical and Equity Income 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 Equity Income Fund are associated (or correlated) with Counterpoint Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Counterpoint Tactical has no effect on the direction of Equity Income i.e., Equity Income and Counterpoint Tactical go up and down completely randomly.

Pair Corralation between Equity Income and Counterpoint Tactical

Assuming the 90 days horizon Equity Income is expected to generate 1.17 times less return on investment than Counterpoint Tactical. In addition to that, Equity Income is 5.46 times more volatile than Counterpoint Tactical Income. It trades about 0.03 of its total potential returns per unit of risk. Counterpoint Tactical Income is currently generating about 0.17 per unit of volatility. If you would invest  1,125  in Counterpoint Tactical Income on September 15, 2024 and sell it today you would earn a total of  13.00  from holding Counterpoint Tactical Income or generate 1.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Equity Income Fund  vs.  Counterpoint Tactical Income

Equity Income

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Income Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Equity Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Counterpoint Tactical

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Counterpoint Tactical Income are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Counterpoint Tactical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Equity Income and Counterpoint Tactical

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

The idea behind Equity Income Fund and Counterpoint Tactical 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.