Correlation Between Rational Strategic and Rational Real

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

By analyzing existing cross correlation between Rational Strategic Allocation and Rational Real Strategies, you can compare the effects of market volatilities on Rational Strategic and Rational Real 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 Rational Strategic with a short position of Rational Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Strategic and Rational Real.

Diversification Opportunities for Rational Strategic and Rational Real

-0.51

Correlation Coefficient

Rational Strategic  Rational Real

Excellent diversification

The 3 months correlation between RATIONAL and Rational is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Rational Strategic Allocation and Rational Real Strategies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Real Strategies and Rational Strategic 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 Rational Strategic Allocation are associated (or correlated) with Rational Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Real Strategies has no effect on the direction of Rational Strategic i.e., Rational Strategic and Rational Real go up and down completely randomly.

Pair Corralation between Rational Strategic and Rational Real

Assuming the 90 days horizon Rational Strategic Allocation is expected to under-perform the Rational Real. In addition to that, Rational Strategic is 30.53 times more volatile than Rational Real Strategies. It trades about -0.12 of its total potential returns per unit of risk. Rational Real Strategies is currently generating about 0.15 per unit of volatility. If you would invest  1,610  in Rational Real Strategies on December 23, 2024 and sell it today you would earn a total of  9.00  from holding Rational Real Strategies or generate 0.56% return on investment over 90 days.

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

Rational Strategic Allocation  vs.  Rational Real Strategies

Rational Strategic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rational Strategic Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Rational Real Strategies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Real Strategies are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Rational Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rational Strategic and Rational Real

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

The idea behind Rational Strategic Allocation and Rational Real Strategies 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.