Correlation Between Strategic Asset and Short-term Income

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

By analyzing existing cross correlation between Strategic Asset Management and Short Term Income Fund, you can compare the effects of market volatilities on Strategic Asset and Short-term Income 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 Strategic Asset with a short position of Short-term Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Asset and Short-term Income.

Diversification Opportunities for Strategic Asset and Short-term Income

0.26

Correlation Coefficient

Strategic Asset  Short-term Income

Modest diversification

The 3 months correlation between Strategic and Short-term is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Asset Management and Short Term Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Income and Strategic Asset 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 Strategic Asset Management are associated (or correlated) with Short-term Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Income has no effect on the direction of Strategic Asset i.e., Strategic Asset and Short-term Income go up and down completely randomly.

Pair Corralation between Strategic Asset and Short-term Income

Assuming the 90 days horizon Strategic Asset is expected to generate 4.24 times less return on investment than Short-term Income. In addition to that, Strategic Asset is 2.89 times more volatile than Short Term Income Fund. It trades about 0.01 of its total potential returns per unit of risk. Short Term Income Fund is currently generating about 0.12 per unit of volatility. If you would invest  1,188  in Short Term Income Fund on October 23, 2024 and sell it today you would earn a total of  10.00  from holding Short Term Income Fund or generate 0.84% return on investment over 90 days.

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

Strategic Asset Management  vs.  Short Term Income Fund

Strategic Asset Mana

Risk-Adjusted Performance

0 of 100

Very Weak

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

Short Term Income

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Strategic Asset and Short-term Income

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

The idea behind Strategic Asset Management and Short Term Income 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.