Correlation Between Total Return and Janus Balanced

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

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

Diversification Opportunities for Total Return and Janus Balanced

0.7

Correlation Coefficient

Total Return  Janus Balanced

Poor diversification

The 3 months correlation between Total and Janus is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Fund and Janus Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Janus Balanced and Total 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 Total Return Fund are associated (or correlated) with Janus Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Janus Balanced has no effect on the direction of Total Return i.e., Total Return and Janus Balanced go up and down completely randomly.

Pair Corralation between Total Return and Janus Balanced

Assuming the 90 days horizon Total Return is expected to generate 4.97 times less return on investment than Janus Balanced. But when comparing it to its historical volatility, Total Return Fund is 1.72 times less risky than Janus Balanced. It trades about 0.04 of its potential returns per unit of risk. Janus Balanced Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,647  in Janus Balanced Fund on October 26, 2024 and sell it today you would earn a total of  56.00  from holding Janus Balanced Fund or generate 1.21% return on investment over 90 days.

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

Total Return Fund  vs.  Janus Balanced Fund

Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

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

Janus Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Total Return and Janus Balanced

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

The idea behind Total Return Fund and Janus Balanced 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.

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.