Correlation Between Catalyst/millburn and Financial Services

Can any of the company-specific risk be diversified away by investing in both Catalyst/millburn and Financial Services 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 Catalyst/millburn and Financial Services into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Catalystmillburn Hedge Strategy and Financial Services Fund, you can compare the effects of market volatilities on Catalyst/millburn and Financial Services 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 Catalyst/millburn with a short position of Financial Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalyst/millburn and Financial Services.

Diversification Opportunities for Catalyst/millburn and Financial Services

0.41

Correlation Coefficient

Catalyst/millburn  Financial Services

Very weak diversification

The 3 months correlation between Catalyst/millburn and Financial is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Catalystmillburn Hedge Strateg and Financial Services Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Services and Catalyst/millburn 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 Catalystmillburn Hedge Strategy are associated (or correlated) with Financial Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Services has no effect on the direction of Catalyst/millburn i.e., Catalyst/millburn and Financial Services go up and down completely randomly.

Pair Corralation between Catalyst/millburn and Financial Services

Assuming the 90 days horizon Catalystmillburn Hedge Strategy is expected to under-perform the Financial Services. But the mutual fund apears to be less risky and, when comparing its historical volatility, Catalystmillburn Hedge Strategy is 1.61 times less risky than Financial Services. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Financial Services Fund is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,825  in Financial Services Fund on December 26, 2024 and sell it today you would earn a total of  34.00  from holding Financial Services Fund or generate 0.39% return on investment over 90 days.

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

Catalystmillburn Hedge Strateg  vs.  Financial Services Fund

Catalystmillburn Hedge

Risk-Adjusted Performance

Very Weak

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

Financial Services

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Catalyst/millburn and Financial Services

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

The idea behind Catalystmillburn Hedge Strategy and Financial Services Fund 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.