Correlation Between Alphacentric Lifesci and High-yield Fund

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

By analyzing existing cross correlation between Alphacentric Lifesci Healthcare and High Yield Fund R6, you can compare the effects of market volatilities on Alphacentric Lifesci and High-yield Fund 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 Alphacentric Lifesci with a short position of High-yield Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphacentric Lifesci and High-yield Fund.

Diversification Opportunities for Alphacentric Lifesci and High-yield Fund

0.84

Correlation Coefficient

Alphacentric Lifesci  High-yield Fund

Very poor diversification

The 3 months correlation between Alphacentric and High-yield is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Alphacentric Lifesci Healthcar and High Yield Fund R6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Fund and Alphacentric Lifesci 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 Alphacentric Lifesci Healthcare are associated (or correlated) with High-yield Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Fund has no effect on the direction of Alphacentric Lifesci i.e., Alphacentric Lifesci and High-yield Fund go up and down completely randomly.

Pair Corralation between Alphacentric Lifesci and High-yield Fund

Assuming the 90 days horizon Alphacentric Lifesci Healthcare is expected to generate 3.73 times more return on investment than High-yield Fund. However, Alphacentric Lifesci is 3.73 times more volatile than High Yield Fund R6. It trades about 0.07 of its potential returns per unit of risk. High Yield Fund R6 is currently generating about 0.17 per unit of risk. If you would invest  1,267  in Alphacentric Lifesci Healthcare on December 22, 2024 and sell it today you would earn a total of  39.00  from holding Alphacentric Lifesci Healthcare or generate 3.08% return on investment over 90 days.

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

Alphacentric Lifesci Healthcar  vs.  High Yield Fund R6

Alphacentric Lifesci

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alphacentric Lifesci Healthcare are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Alphacentric Lifesci is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

High Yield Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in High Yield Fund R6 are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, High-yield Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alphacentric Lifesci and High-yield Fund

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

The idea behind Alphacentric Lifesci Healthcare and High Yield Fund R6 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.