Correlation Between Real Return and Barings Active

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

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

Diversification Opportunities for Real Return and Barings Active

0.05

Correlation Coefficient

Real Return  Barings Active

Significant diversification

The 3 months correlation between Real and Barings is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Real Return Fund and Barings Active Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings Active Short and Real Return 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 Real Return Fund are associated (or correlated) with Barings Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings Active Short has no effect on the direction of Real Return i.e., Real Return and Barings Active go up and down completely randomly.

Pair Corralation between Real Return and Barings Active

Assuming the 90 days horizon Real Return Fund is expected to under-perform the Barings Active. In addition to that, Real Return is 2.39 times more volatile than Barings Active Short. It trades about -0.06 of its total potential returns per unit of risk. Barings Active Short is currently generating about 0.1 per unit of volatility. If you would invest  919.00  in Barings Active Short on September 12, 2024 and sell it today you would earn a total of  7.00  from holding Barings Active Short or generate 0.76% return on investment over 90 days.

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

Real Return Fund  vs.  Barings Active Short

Real Return Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Barings Active Short

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barings Active Short are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Barings Active is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Real Return and Barings Active

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

The idea behind Real Return Fund and Barings Active Short 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.