Correlation Between Locorr Dynamic and Aristotle Funds

Can any of the company-specific risk be diversified away by investing in both Locorr Dynamic and Aristotle Funds 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 Locorr Dynamic and Aristotle Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Locorr Dynamic Equity and Aristotle Funds Series, you can compare the effects of market volatilities on Locorr Dynamic and Aristotle Funds 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 Locorr Dynamic with a short position of Aristotle Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Locorr Dynamic and Aristotle Funds.

Diversification Opportunities for Locorr Dynamic and Aristotle Funds

0.66

Correlation Coefficient

Locorr Dynamic  Aristotle Funds

Poor diversification

The 3 months correlation between Locorr and Aristotle is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Locorr Dynamic Equity and Aristotle Funds Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristotle Funds Series and Locorr Dynamic 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 Locorr Dynamic Equity are associated (or correlated) with Aristotle Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristotle Funds Series has no effect on the direction of Locorr Dynamic i.e., Locorr Dynamic and Aristotle Funds go up and down completely randomly.

Pair Corralation between Locorr Dynamic and Aristotle Funds

Assuming the 90 days horizon Locorr Dynamic is expected to generate 2.73 times less return on investment than Aristotle Funds. But when comparing it to its historical volatility, Locorr Dynamic Equity is 1.83 times less risky than Aristotle Funds. It trades about 0.04 of its potential returns per unit of risk. Aristotle Funds Series is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  572.00  in Aristotle Funds Series on October 23, 2024 and sell it today you would earn a total of  141.00  from holding Aristotle Funds Series or generate 24.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.68%
Values	Daily Returns

Locorr Dynamic Equity  vs.  Aristotle Funds Series

Locorr Dynamic Equity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Locorr Dynamic Equity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Locorr Dynamic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aristotle Funds Series

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Locorr Dynamic and Aristotle Funds

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

The idea behind Locorr Dynamic Equity and Aristotle Funds Series 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.