Correlation Between Muhlenkamp Fund and Fam Value

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

By analyzing existing cross correlation between Muhlenkamp Fund Institutional and Fam Value Fund, you can compare the effects of market volatilities on Muhlenkamp Fund and Fam Value 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 Muhlenkamp Fund with a short position of Fam Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Muhlenkamp Fund and Fam Value.

Diversification Opportunities for Muhlenkamp Fund and Fam Value

0.8

Correlation Coefficient

Muhlenkamp Fund  Fam Value

Very poor diversification

The 3 months correlation between Muhlenkamp and Fam is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Muhlenkamp Fund Institutional and Fam Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fam Value Fund and Muhlenkamp Fund 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 Muhlenkamp Fund Institutional are associated (or correlated) with Fam Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fam Value Fund has no effect on the direction of Muhlenkamp Fund i.e., Muhlenkamp Fund and Fam Value go up and down completely randomly.

Pair Corralation between Muhlenkamp Fund and Fam Value

Assuming the 90 days horizon Muhlenkamp Fund is expected to generate 2.32 times less return on investment than Fam Value. But when comparing it to its historical volatility, Muhlenkamp Fund Institutional is 1.18 times less risky than Fam Value. It trades about 0.06 of its potential returns per unit of risk. Fam Value Fund is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  10,319  in Fam Value Fund on September 14, 2024 and sell it today you would earn a total of  639.00  from holding Fam Value Fund or generate 6.19% return on investment over 90 days.

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

Muhlenkamp Fund Institutional  vs.  Fam Value Fund

Muhlenkamp Fund Inst

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Muhlenkamp Fund Institutional are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Muhlenkamp Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fam Value Fund

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fam Value Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fam Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Muhlenkamp Fund and Fam Value

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

The idea behind Muhlenkamp Fund Institutional and Fam Value Fund 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.