Correlation Between Catalystmillburn and Kensington Managed

Can any of the company-specific risk be diversified away by investing in both Catalystmillburn and Kensington Managed 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 Catalystmillburn and Kensington Managed 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 Kensington Managed Income, you can compare the effects of market volatilities on Catalystmillburn and Kensington Managed 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 Catalystmillburn with a short position of Kensington Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalystmillburn and Kensington Managed.

Diversification Opportunities for Catalystmillburn and Kensington Managed

0.66

Correlation Coefficient

Catalystmillburn  Kensington Managed

Poor diversification

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

Pair Corralation between Catalystmillburn and Kensington Managed

Assuming the 90 days horizon Catalystmillburn Hedge Strategy is expected to generate 2.92 times more return on investment than Kensington Managed. However, Catalystmillburn is 2.92 times more volatile than Kensington Managed Income. It trades about 0.24 of its potential returns per unit of risk. Kensington Managed Income is currently generating about 0.13 per unit of risk. If you would invest  3,807  in Catalystmillburn Hedge Strategy on September 14, 2024 and sell it today you would earn a total of  253.00  from holding Catalystmillburn Hedge Strategy or generate 6.65% return on investment over 90 days.

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

Catalystmillburn Hedge Strateg  vs.  Kensington Managed Income

Catalystmillburn Hedge

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalystmillburn Hedge Strategy are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Catalystmillburn may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kensington Managed Income

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kensington Managed Income are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Kensington Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Catalystmillburn and Kensington Managed

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

The idea behind Catalystmillburn Hedge Strategy and Kensington Managed Income 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.