Correlation Between Energy Fund and Energy Fund

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

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

Diversification Opportunities for Energy Fund and Energy Fund

1.0

Correlation Coefficient

Energy Fund  Energy Fund

No risk reduction

The 3 months correlation between Energy and Energy is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Energy Fund Class and Energy Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Fund Investor and Energy Fund 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 Energy Fund Class are associated (or correlated) with Energy Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Fund Investor has no effect on the direction of Energy Fund i.e., Energy Fund and Energy Fund go up and down completely randomly.

Pair Corralation between Energy Fund and Energy Fund

Assuming the 90 days horizon Energy Fund Class is expected to under-perform the Energy Fund. In addition to that, Energy Fund is 1.0 times more volatile than Energy Fund Investor. It trades about -0.11 of its total potential returns per unit of risk. Energy Fund Investor is currently generating about -0.11 per unit of volatility. If you would invest  27,051  in Energy Fund Investor on November 29, 2024 and sell it today you would lose (2,160) from holding Energy Fund Investor or give up 7.98% of portfolio value over 90 days.

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

Energy Fund Class  vs.  Energy Fund Investor

Energy Fund Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy Fund Class 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.

Energy Fund Investor

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Energy Fund and Energy Fund

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

The idea behind Energy Fund Class and Energy Fund Investor 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.