Correlation Between Perkins Small and Balanced Portfolio

Can any of the company-specific risk be diversified away by investing in both Perkins Small and Balanced Portfolio 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 Perkins Small and Balanced Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Perkins Small Cap and Balanced Portfolio Institutional, you can compare the effects of market volatilities on Perkins Small and Balanced Portfolio 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 Perkins Small with a short position of Balanced Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perkins Small and Balanced Portfolio.

Diversification Opportunities for Perkins Small and Balanced Portfolio

0.84

Correlation Coefficient

Perkins Small  Balanced Portfolio

Very poor diversification

The 3 months correlation between Perkins and Balanced is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Perkins Small Cap and Balanced Portfolio Institution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Portfolio and Perkins Small 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 Perkins Small Cap are associated (or correlated) with Balanced Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Portfolio has no effect on the direction of Perkins Small i.e., Perkins Small and Balanced Portfolio go up and down completely randomly.

Pair Corralation between Perkins Small and Balanced Portfolio

Assuming the 90 days horizon Perkins Small Cap is expected to under-perform the Balanced Portfolio. In addition to that, Perkins Small is 1.61 times more volatile than Balanced Portfolio Institutional. It trades about -0.08 of its total potential returns per unit of risk. Balanced Portfolio Institutional is currently generating about -0.06 per unit of volatility. If you would invest  5,140  in Balanced Portfolio Institutional on December 30, 2024 and sell it today you would lose (135.00) from holding Balanced Portfolio Institutional or give up 2.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Perkins Small Cap  vs.  Balanced Portfolio Institution

Perkins Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Perkins Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Perkins Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Balanced Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Balanced Portfolio Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Balanced Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Perkins Small and Balanced Portfolio

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

The idea behind Perkins Small Cap and Balanced Portfolio Institutional 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.