Correlation Between Polen Growth and Polen Smid

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

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

Diversification Opportunities for Polen Growth and Polen Smid

0.91

Correlation Coefficient

Polen Growth  Polen Smid

Almost no diversification

The 3 months correlation between Polen and Polen is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Polen Growth Fund and Polen Smid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polen Smid and Polen Growth 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 Growth Fund are associated (or correlated) with Polen Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polen Smid has no effect on the direction of Polen Growth i.e., Polen Growth and Polen Smid go up and down completely randomly.

Pair Corralation between Polen Growth and Polen Smid

Assuming the 90 days horizon Polen Growth Fund is expected to generate 0.79 times more return on investment than Polen Smid. However, Polen Growth Fund is 1.27 times less risky than Polen Smid. It trades about 0.07 of its potential returns per unit of risk. Polen Smid is currently generating about 0.04 per unit of risk. If you would invest  4,237  in Polen Growth Fund on September 13, 2024 and sell it today you would earn a total of  674.00  from holding Polen Growth Fund or generate 15.91% return on investment over 90 days.

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

Polen Growth Fund  vs.  Polen Smid

Polen Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Polen Growth Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Polen Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Polen Smid

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Polen Smid are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Polen Smid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polen Growth and Polen Smid

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

The idea behind Polen Growth Fund and Polen Smid 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.