Correlation Between Monthly Rebalance and Bright Rock

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

By analyzing existing cross correlation between Monthly Rebalance Nasdaq 100 and Bright Rock Mid, you can compare the effects of market volatilities on Monthly Rebalance and Bright Rock 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 Monthly Rebalance with a short position of Bright Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monthly Rebalance and Bright Rock.

Diversification Opportunities for Monthly Rebalance and Bright Rock

0.87

Correlation Coefficient

Monthly Rebalance  Bright Rock

Very poor diversification

The 3 months correlation between Monthly and Bright is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Monthly Rebalance Nasdaq 100 and Bright Rock Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Rock Mid and Monthly Rebalance 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 Monthly Rebalance Nasdaq 100 are associated (or correlated) with Bright Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Rock Mid has no effect on the direction of Monthly Rebalance i.e., Monthly Rebalance and Bright Rock go up and down completely randomly.

Pair Corralation between Monthly Rebalance and Bright Rock

Assuming the 90 days horizon Monthly Rebalance Nasdaq 100 is expected to under-perform the Bright Rock. In addition to that, Monthly Rebalance is 3.56 times more volatile than Bright Rock Mid. It trades about -0.11 of its total potential returns per unit of risk. Bright Rock Mid is currently generating about -0.1 per unit of volatility. If you would invest  2,462  in Bright Rock Mid on December 29, 2024 and sell it today you would lose (128.00) from holding Bright Rock Mid or give up 5.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Monthly Rebalance Nasdaq 100  vs.  Bright Rock Mid

Monthly Rebalance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monthly Rebalance Nasdaq 100 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 basic 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.

Bright Rock Mid

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Monthly Rebalance and Bright Rock

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

The idea behind Monthly Rebalance Nasdaq 100 and Bright Rock Mid 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.