Correlation Between Spectrum Income and Spectrum Growth

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

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

Diversification Opportunities for Spectrum Income and Spectrum Growth

-0.43

Correlation Coefficient

Spectrum Income  Spectrum Growth

Very good diversification

The 3 months correlation between Spectrum and Spectrum is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Income Fund and Spectrum Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Growth and Spectrum Income 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 Spectrum Income Fund are associated (or correlated) with Spectrum Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Growth has no effect on the direction of Spectrum Income i.e., Spectrum Income and Spectrum Growth go up and down completely randomly.

Pair Corralation between Spectrum Income and Spectrum Growth

Assuming the 90 days horizon Spectrum Income is expected to generate 575.5 times less return on investment than Spectrum Growth. But when comparing it to its historical volatility, Spectrum Income Fund is 3.21 times less risky than Spectrum Growth. It trades about 0.0 of its potential returns per unit of risk. Spectrum Growth Fund is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,640  in Spectrum Growth Fund on September 2, 2024 and sell it today you would earn a total of  198.00  from holding Spectrum Growth Fund or generate 7.5% return on investment over 90 days.

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

Spectrum Income Fund  vs.  Spectrum Growth Fund

Spectrum Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Spectrum Growth

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Spectrum Growth Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Spectrum Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Spectrum Income and Spectrum Growth

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

The idea behind Spectrum Income Fund and Spectrum Growth 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .