Correlation Between Perkins Select and Flexible Bond

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

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

Diversification Opportunities for Perkins Select and Flexible Bond

0.42

Correlation Coefficient

Perkins Select  Flexible Bond

Very weak diversification

The 3 months correlation between PERKINS and Flexible is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Perkins Select Value and Flexible Bond Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Bond Portfolio and Perkins Select 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 Select Value are associated (or correlated) with Flexible Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Bond Portfolio has no effect on the direction of Perkins Select i.e., Perkins Select and Flexible Bond go up and down completely randomly.

Pair Corralation between Perkins Select and Flexible Bond

Assuming the 90 days horizon Perkins Select Value is expected to under-perform the Flexible Bond. In addition to that, Perkins Select is 4.01 times more volatile than Flexible Bond Portfolio. It trades about -0.22 of its total potential returns per unit of risk. Flexible Bond Portfolio is currently generating about 0.04 per unit of volatility. If you would invest  991.00  in Flexible Bond Portfolio on November 28, 2024 and sell it today you would earn a total of  7.00  from holding Flexible Bond Portfolio or generate 0.71% return on investment over 90 days.

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

Perkins Select Value  vs.  Flexible Bond Portfolio

Perkins Select Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Perkins Select Value 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 basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Flexible Bond Portfolio

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Bond Portfolio are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Flexible Bond 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 Select and Flexible Bond

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

The idea behind Perkins Select Value and Flexible Bond Portfolio 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.