Correlation Between Us Strategic and Index Plus

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

By analyzing existing cross correlation between Us Strategic Equity and Index Plus Largecap, you can compare the effects of market volatilities on Us Strategic and Index Plus 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 Us Strategic with a short position of Index Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Strategic and Index Plus.

Diversification Opportunities for Us Strategic and Index Plus

0.58

Correlation Coefficient

Us Strategic  Index Plus

Very weak diversification

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

Pair Corralation between Us Strategic and Index Plus

Assuming the 90 days horizon Us Strategic Equity is expected to under-perform the Index Plus. In addition to that, Us Strategic is 1.01 times more volatile than Index Plus Largecap. It trades about -0.13 of its total potential returns per unit of risk. Index Plus Largecap is currently generating about -0.11 per unit of volatility. If you would invest  3,031  in Index Plus Largecap on December 2, 2024 and sell it today you would lose (60.00) from holding Index Plus Largecap or give up 1.98% of portfolio value over 90 days.

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

Us Strategic Equity  vs.  Index Plus Largecap

Us Strategic Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Us Strategic Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Index Plus Largecap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Us Strategic and Index Plus

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

The idea behind Us Strategic Equity and Index Plus Largecap 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.