Correlation Between Scharf Fund and State Street

Can any of the company-specific risk be diversified away by investing in both Scharf Fund and State Street 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 Scharf Fund and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Scharf Fund Retail and State Street Target, you can compare the effects of market volatilities on Scharf Fund and State Street 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 Scharf Fund with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scharf Fund and State Street.

Diversification Opportunities for Scharf Fund and State Street

0.11

Correlation Coefficient

Scharf Fund  State Street

Average diversification

The 3 months correlation between Scharf and State is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Scharf Fund Retail and State Street Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Target and Scharf Fund 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 Scharf Fund Retail are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Target has no effect on the direction of Scharf Fund i.e., Scharf Fund and State Street go up and down completely randomly.

Pair Corralation between Scharf Fund and State Street

Assuming the 90 days horizon Scharf Fund Retail is expected to generate 0.17 times more return on investment than State Street. However, Scharf Fund Retail is 5.93 times less risky than State Street. It trades about -0.03 of its potential returns per unit of risk. State Street Target is currently generating about -0.03 per unit of risk. If you would invest  5,151  in Scharf Fund Retail on December 23, 2024 and sell it today you would lose (14.00) from holding Scharf Fund Retail or give up 0.27% of portfolio value over 90 days.

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

Scharf Fund Retail  vs.  State Street Target

Scharf Fund Retail

Risk-Adjusted Performance

Very Weak

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

State Street Target

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Scharf Fund and State Street

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

The idea behind Scharf Fund Retail and State Street Target 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.