Correlation Between Balanced Strategy and Managed Account

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

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

Diversification Opportunities for Balanced Strategy and Managed Account

0.58

Correlation Coefficient

Balanced Strategy  Managed Account

Very weak diversification

The 3 months correlation between Balanced and Managed is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy Fund and Managed Account Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Managed Account Series and Balanced Strategy 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 Balanced Strategy Fund are associated (or correlated) with Managed Account. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Managed Account Series has no effect on the direction of Balanced Strategy i.e., Balanced Strategy and Managed Account go up and down completely randomly.

Pair Corralation between Balanced Strategy and Managed Account

Assuming the 90 days horizon Balanced Strategy Fund is expected to generate 1.56 times more return on investment than Managed Account. However, Balanced Strategy is 1.56 times more volatile than Managed Account Series. It trades about 0.07 of its potential returns per unit of risk. Managed Account Series is currently generating about 0.05 per unit of risk. If you would invest  866.00  in Balanced Strategy Fund on October 12, 2024 and sell it today you would earn a total of  156.00  from holding Balanced Strategy Fund or generate 18.01% return on investment over 90 days.

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

Balanced Strategy Fund  vs.  Managed Account Series

Balanced Strategy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Managed Account Series

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Balanced Strategy and Managed Account

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

The idea behind Balanced Strategy Fund and Managed Account Series 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.