Correlation Between Spectrum International and Spectrum Income

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

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

Diversification Opportunities for Spectrum International and Spectrum Income

0.67

Correlation Coefficient

Spectrum International  Spectrum Income

Poor diversification

The 3 months correlation between Spectrum and Spectrum is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum International Fund and Spectrum Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Income and Spectrum International 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 Spectrum International Fund are associated (or correlated) with Spectrum Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Income has no effect on the direction of Spectrum International i.e., Spectrum International and Spectrum Income go up and down completely randomly.

Pair Corralation between Spectrum International and Spectrum Income

Assuming the 90 days horizon Spectrum International Fund is expected to under-perform the Spectrum Income. In addition to that, Spectrum International is 3.82 times more volatile than Spectrum Income Fund. It trades about -0.02 of its total potential returns per unit of risk. Spectrum Income Fund is currently generating about -0.03 per unit of volatility. If you would invest  1,141  in Spectrum Income Fund on September 12, 2024 and sell it today you would lose (4.00) from holding Spectrum Income Fund or give up 0.35% of portfolio value over 90 days.

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

Spectrum International Fund  vs.  Spectrum Income Fund

Spectrum International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Spectrum Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectrum Income Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Spectrum 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 Spectrum International and Spectrum Income

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

The idea behind Spectrum International Fund and Spectrum 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.