Correlation Between Stocksplus Total and Fundamental Indexplus

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

By analyzing existing cross correlation between Stocksplus Total Return and Fundamental Indexplus Tr, you can compare the effects of market volatilities on Stocksplus Total and Fundamental Indexplus 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 Stocksplus Total with a short position of Fundamental Indexplus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stocksplus Total and Fundamental Indexplus.

Diversification Opportunities for Stocksplus Total and Fundamental Indexplus

0.78

Correlation Coefficient

Stocksplus Total  Fundamental Indexplus

Poor diversification

The 3 months correlation between Stocksplus and Fundamental is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Stocksplus Total Return and Fundamental Indexplus Tr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Indexplus and Stocksplus Total 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 Stocksplus Total Return are associated (or correlated) with Fundamental Indexplus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Indexplus has no effect on the direction of Stocksplus Total i.e., Stocksplus Total and Fundamental Indexplus go up and down completely randomly.

Pair Corralation between Stocksplus Total and Fundamental Indexplus

Assuming the 90 days horizon Stocksplus Total Return is expected to under-perform the Fundamental Indexplus. In addition to that, Stocksplus Total is 1.68 times more volatile than Fundamental Indexplus Tr. It trades about -0.17 of its total potential returns per unit of risk. Fundamental Indexplus Tr is currently generating about -0.26 per unit of volatility. If you would invest  2,076  in Fundamental Indexplus Tr on September 27, 2024 and sell it today you would lose (91.00) from holding Fundamental Indexplus Tr or give up 4.38% of portfolio value over 90 days.

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

Stocksplus Total Return  vs.  Fundamental Indexplus Tr

Stocksplus Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fundamental Indexplus

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Stocksplus Total and Fundamental Indexplus

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

The idea behind Stocksplus Total Return and Fundamental Indexplus Tr 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.