Correlation Between Polen Small and Polen Growth

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

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

Diversification Opportunities for Polen Small and Polen Growth

0.93

Correlation Coefficient

Polen Small  Polen Growth

Almost no diversification

The 3 months correlation between Polen and Polen is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Polen Small and Polen Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polen Growth and Polen Small 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 Polen Small are associated (or correlated) with Polen Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polen Growth has no effect on the direction of Polen Small i.e., Polen Small and Polen Growth go up and down completely randomly.

Pair Corralation between Polen Small and Polen Growth

Assuming the 90 days horizon Polen Small is expected to generate 1.26 times more return on investment than Polen Growth. However, Polen Small is 1.26 times more volatile than Polen Growth Fund. It trades about 0.17 of its potential returns per unit of risk. Polen Growth Fund is currently generating about 0.06 per unit of risk. If you would invest  1,376  in Polen Small on September 16, 2024 and sell it today you would earn a total of  182.00  from holding Polen Small or generate 13.23% return on investment over 90 days.

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

Polen Small  vs.  Polen Growth Fund

Polen Small

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Polen Small are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Polen Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Polen Growth

Risk-Adjusted Performance

4 of 100

Modest

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

Pair Trading with Polen Small and Polen Growth

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

The idea behind Polen Small and Polen Growth 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.