Correlation Between Marsico Focus and Selected American

Can any of the company-specific risk be diversified away by investing in both Marsico Focus and Selected American 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 Marsico Focus and Selected American into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Marsico Focus Fund and Selected American Shares, you can compare the effects of market volatilities on Marsico Focus and Selected American 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 Marsico Focus with a short position of Selected American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marsico Focus and Selected American.

Diversification Opportunities for Marsico Focus and Selected American

0.62

Correlation Coefficient

Marsico Focus  Selected American

Poor diversification

The 3 months correlation between Marsico and Selected is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Marsico Focus Fund and Selected American Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selected American Shares and Marsico Focus 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 Marsico Focus Fund are associated (or correlated) with Selected American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selected American Shares has no effect on the direction of Marsico Focus i.e., Marsico Focus and Selected American go up and down completely randomly.

Pair Corralation between Marsico Focus and Selected American

Assuming the 90 days horizon Marsico Focus Fund is expected to under-perform the Selected American. In addition to that, Marsico Focus is 1.59 times more volatile than Selected American Shares. It trades about -0.1 of its total potential returns per unit of risk. Selected American Shares is currently generating about 0.01 per unit of volatility. If you would invest  3,746  in Selected American Shares on December 30, 2024 and sell it today you would earn a total of  20.00  from holding Selected American Shares or generate 0.53% return on investment over 90 days.

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

Marsico Focus Fund  vs.  Selected American Shares

Marsico Focus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marsico Focus Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Selected American Shares

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Selected American Shares are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Selected American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Marsico Focus and Selected American

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

The idea behind Marsico Focus Fund and Selected American Shares 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.