Correlation Between Disciplined Value and Pro-blend(r) Maximum

Can any of the company-specific risk be diversified away by investing in both Disciplined Value and Pro-blend(r) Maximum 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 Disciplined Value and Pro-blend(r) Maximum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Disciplined Value Series and Pro Blend Maximum Term, you can compare the effects of market volatilities on Disciplined Value and Pro-blend(r) Maximum 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 Disciplined Value with a short position of Pro-blend(r) Maximum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disciplined Value and Pro-blend(r) Maximum.

Diversification Opportunities for Disciplined Value and Pro-blend(r) Maximum

0.89

Correlation Coefficient

Disciplined Value  Pro-blend(r) Maximum

Very poor diversification

The 3 months correlation between Disciplined and Pro-blend(r) is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Disciplined Value Series and Pro Blend Maximum Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro-blend(r) Maximum and Disciplined Value 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 Disciplined Value Series are associated (or correlated) with Pro-blend(r) Maximum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro-blend(r) Maximum has no effect on the direction of Disciplined Value i.e., Disciplined Value and Pro-blend(r) Maximum go up and down completely randomly.

Pair Corralation between Disciplined Value and Pro-blend(r) Maximum

Assuming the 90 days horizon Disciplined Value Series is expected to generate 1.4 times more return on investment than Pro-blend(r) Maximum. However, Disciplined Value is 1.4 times more volatile than Pro Blend Maximum Term. It trades about 0.14 of its potential returns per unit of risk. Pro Blend Maximum Term is currently generating about 0.13 per unit of risk. If you would invest  827.00  in Disciplined Value Series on September 4, 2024 and sell it today you would earn a total of  56.00  from holding Disciplined Value Series or generate 6.77% return on investment over 90 days.

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

Disciplined Value Series  vs.  Pro Blend Maximum Term

Disciplined Value Series

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Disciplined Value Series are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Disciplined Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pro-blend(r) Maximum

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Disciplined Value and Pro-blend(r) Maximum

The main advantage of trading using opposite Disciplined Value and Pro-blend(r) Maximum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disciplined Value position performs unexpectedly, Pro-blend(r) Maximum 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 Pro-blend(r) Maximum will offset losses from the drop in Pro-blend(r) Maximum's long position.

The idea behind Disciplined Value Series and Pro Blend Maximum Term 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.