Correlation Between Pro Blend and Pro Blend

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

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

Diversification Opportunities for Pro Blend and Pro Blend

0.51

Correlation Coefficient

Pro Blend  Pro Blend

Very weak diversification

The 3 months correlation between Pro and Pro is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Pro Blend Extended Term and Pro Blend Maximum Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro Blend Maximum and Pro Blend 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 Pro Blend Extended Term are associated (or correlated) with Pro Blend. 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 Maximum has no effect on the direction of Pro Blend i.e., Pro Blend and Pro Blend go up and down completely randomly.

Pair Corralation between Pro Blend and Pro Blend

Assuming the 90 days horizon Pro Blend is expected to generate 3.9 times less return on investment than Pro Blend. But when comparing it to its historical volatility, Pro Blend Extended Term is 1.41 times less risky than Pro Blend. It trades about 0.05 of its potential returns per unit of risk. Pro Blend Maximum Term is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,660  in Pro Blend Maximum Term on September 13, 2024 and sell it today you would earn a total of  128.00  from holding Pro Blend Maximum Term or generate 4.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Pro Blend Extended Term  vs.  Pro Blend Maximum Term

Pro Blend Extended

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Blend Extended Term are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Pro Blend is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pro Blend 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 forward indicators, Pro Blend is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pro Blend and Pro Blend

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

The idea behind Pro Blend Extended Term 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.