Correlation Between Pacific Funds and Aristotle Funds

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

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

Diversification Opportunities for Pacific Funds and Aristotle Funds

-0.27

Correlation Coefficient

Pacific Funds  Aristotle Funds

Very good diversification

The 3 months correlation between Pacific and Aristotle is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Funds Small Cap and Aristotle Funds Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristotle Funds Series and Pacific Funds 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 Pacific Funds Small Cap are associated (or correlated) with Aristotle Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristotle Funds Series has no effect on the direction of Pacific Funds i.e., Pacific Funds and Aristotle Funds go up and down completely randomly.

Pair Corralation between Pacific Funds and Aristotle Funds

Assuming the 90 days horizon Pacific Funds Small Cap is expected to under-perform the Aristotle Funds. In addition to that, Pacific Funds is 1.0 times more volatile than Aristotle Funds Series. It trades about -0.01 of its total potential returns per unit of risk. Aristotle Funds Series is currently generating about 0.03 per unit of volatility. If you would invest  1,300  in Aristotle Funds Series on September 30, 2024 and sell it today you would earn a total of  182.00  from holding Aristotle Funds Series or generate 14.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	21.4%
Values	Daily Returns

Pacific Funds Small Cap  vs.  Aristotle Funds Series

Pacific Funds Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Funds Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Pacific Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aristotle Funds Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aristotle Funds Series has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Aristotle Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pacific Funds and Aristotle Funds

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

The idea behind Pacific Funds Small Cap and Aristotle Funds Series 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.