Correlation Between Mairs Power and Muhlenkamp Fund

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

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

Diversification Opportunities for Mairs Power and Muhlenkamp Fund

0.95

Correlation Coefficient

Mairs Power  Muhlenkamp Fund

Almost no diversification

The 3 months correlation between Mairs and Muhlenkamp is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Mairs Power Balanced and Muhlenkamp Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muhlenkamp Fund Inst and Mairs Power 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 Mairs Power Balanced are associated (or correlated) with Muhlenkamp Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muhlenkamp Fund Inst has no effect on the direction of Mairs Power i.e., Mairs Power and Muhlenkamp Fund go up and down completely randomly.

Pair Corralation between Mairs Power and Muhlenkamp Fund

Assuming the 90 days horizon Mairs Power is expected to generate 1.59 times less return on investment than Muhlenkamp Fund. But when comparing it to its historical volatility, Mairs Power Balanced is 1.56 times less risky than Muhlenkamp Fund. It trades about 0.15 of its potential returns per unit of risk. Muhlenkamp Fund Institutional is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,978  in Muhlenkamp Fund Institutional on September 3, 2024 and sell it today you would earn a total of  495.00  from holding Muhlenkamp Fund Institutional or generate 7.09% return on investment over 90 days.

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

Mairs Power Balanced  vs.  Muhlenkamp Fund Institutional

Mairs Power Balanced

Risk-Adjusted Performance

11 of 100

Good

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

Muhlenkamp Fund Inst

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Muhlenkamp Fund Institutional are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Muhlenkamp Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mairs Power and Muhlenkamp Fund

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

The idea behind Mairs Power Balanced and Muhlenkamp Fund 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..