Correlation Between Morningstar Unconstrained and Costamare

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

By analyzing existing cross correlation between Morningstar Unconstrained Allocation and Costamare, you can compare the effects of market volatilities on Morningstar Unconstrained and Costamare 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 Morningstar Unconstrained with a short position of Costamare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Unconstrained and Costamare.

Diversification Opportunities for Morningstar Unconstrained and Costamare

-0.45

Correlation Coefficient

Morningstar Unconstrained  Costamare

Very good diversification

The 3 months correlation between Morningstar and Costamare is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Unconstrained Allo and Costamare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costamare and Morningstar Unconstrained 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 Morningstar Unconstrained Allocation are associated (or correlated) with Costamare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costamare has no effect on the direction of Morningstar Unconstrained i.e., Morningstar Unconstrained and Costamare go up and down completely randomly.

Pair Corralation between Morningstar Unconstrained and Costamare

Assuming the 90 days horizon Morningstar Unconstrained Allocation is expected to under-perform the Costamare. In addition to that, Morningstar Unconstrained is 1.42 times more volatile than Costamare. It trades about -0.1 of its total potential returns per unit of risk. Costamare is currently generating about 0.14 per unit of volatility. If you would invest  2,486  in Costamare on November 29, 2024 and sell it today you would earn a total of  144.00  from holding Costamare or generate 5.79% return on investment over 90 days.

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

Morningstar Unconstrained Allo  vs.  Costamare

Morningstar Unconstrained

Risk-Adjusted Performance

Very Weak

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

Costamare

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costamare are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Costamare is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Morningstar Unconstrained and Costamare

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

The idea behind Morningstar Unconstrained Allocation and Costamare 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.