Correlation Between Leisure Fund and Automotive Portfolio

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

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

Diversification Opportunities for Leisure Fund and Automotive Portfolio

0.54

Correlation Coefficient

Leisure Fund  Automotive Portfolio

Very weak diversification

The 3 months correlation between Leisure and Automotive is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Leisure Fund Investor and Automotive Portfolio Automotiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automotive Portfolio and Leisure 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 Leisure Fund Investor are associated (or correlated) with Automotive Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automotive Portfolio has no effect on the direction of Leisure Fund i.e., Leisure Fund and Automotive Portfolio go up and down completely randomly.

Pair Corralation between Leisure Fund and Automotive Portfolio

Assuming the 90 days horizon Leisure Fund Investor is expected to generate 0.84 times more return on investment than Automotive Portfolio. However, Leisure Fund Investor is 1.19 times less risky than Automotive Portfolio. It trades about -0.02 of its potential returns per unit of risk. Automotive Portfolio Automotive is currently generating about -0.06 per unit of risk. If you would invest  9,234  in Leisure Fund Investor on December 30, 2024 and sell it today you would lose (181.00) from holding Leisure Fund Investor or give up 1.96% of portfolio value over 90 days.

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

Leisure Fund Investor  vs.  Automotive Portfolio Automotiv

Leisure Fund Investor

Risk-Adjusted Performance

Very Weak

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

Automotive Portfolio

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Leisure Fund and Automotive Portfolio

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

The idea behind Leisure Fund Investor and Automotive Portfolio Automotive 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.