Correlation Between Balanced Strategy and Sierra Core

Can any of the company-specific risk be diversified away by investing in both Balanced Strategy and Sierra Core 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 Sierra Core 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 Sierra E Retirement, you can compare the effects of market volatilities on Balanced Strategy and Sierra Core 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 Sierra Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Strategy and Sierra Core.

Diversification Opportunities for Balanced Strategy and Sierra Core

0.85

Correlation Coefficient

Balanced Strategy  Sierra Core

Very poor diversification

The 3 months correlation between Balanced and Sierra is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy Fund and Sierra E Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra E Retirement 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 Sierra Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra E Retirement has no effect on the direction of Balanced Strategy i.e., Balanced Strategy and Sierra Core go up and down completely randomly.

Pair Corralation between Balanced Strategy and Sierra Core

Assuming the 90 days horizon Balanced Strategy Fund is expected to generate 1.43 times more return on investment than Sierra Core. However, Balanced Strategy is 1.43 times more volatile than Sierra E Retirement. It trades about 0.02 of its potential returns per unit of risk. Sierra E Retirement is currently generating about -0.04 per unit of risk. If you would invest  1,010  in Balanced Strategy Fund on October 10, 2024 and sell it today you would earn a total of  14.00  from holding Balanced Strategy Fund or generate 1.39% return on investment over 90 days.

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

Balanced Strategy Fund  vs.  Sierra E Retirement

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.

Sierra E Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sierra E Retirement has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sierra Core 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 Sierra Core

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

The idea behind Balanced Strategy Fund and Sierra E Retirement 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.