Correlation Between Polen Growth and Pear Tree

Can any of the company-specific risk be diversified away by investing in both Polen Growth and Pear Tree 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 Pear Tree 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 Pear Tree Quality, you can compare the effects of market volatilities on Polen Growth and Pear Tree 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 Pear Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polen Growth and Pear Tree.

Diversification Opportunities for Polen Growth and Pear Tree

0.82

Correlation Coefficient

Polen Growth  Pear Tree

Very poor diversification

The 3 months correlation between Polen and Pear is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Polen Growth Fund and Pear Tree Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pear Tree Quality 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 Pear Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pear Tree Quality has no effect on the direction of Polen Growth i.e., Polen Growth and Pear Tree go up and down completely randomly.

Pair Corralation between Polen Growth and Pear Tree

Assuming the 90 days horizon Polen Growth Fund is expected to generate 0.85 times more return on investment than Pear Tree. However, Polen Growth Fund is 1.18 times less risky than Pear Tree. It trades about -0.09 of its potential returns per unit of risk. Pear Tree Quality is currently generating about -0.09 per unit of risk. If you would invest  4,856  in Polen Growth Fund on December 1, 2024 and sell it today you would lose (270.00) from holding Polen Growth Fund or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Polen Growth Fund  vs.  Pear Tree Quality

Polen Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polen Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. 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.

Pear Tree Quality

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pear Tree Quality has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Polen Growth and Pear Tree

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

The idea behind Polen Growth Fund and Pear Tree Quality 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..