Correlation Between Leisure Fund and Energy Focu

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

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

Diversification Opportunities for Leisure Fund and Energy Focu

0.54

Correlation Coefficient

Leisure Fund  Energy Focu

Very weak diversification

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

Pair Corralation between Leisure Fund and Energy Focu

Assuming the 90 days horizon Leisure Fund Class is expected to generate 0.41 times more return on investment than Energy Focu. However, Leisure Fund Class is 2.41 times less risky than Energy Focu. It trades about -0.28 of its potential returns per unit of risk. Energy Focu is currently generating about -0.4 per unit of risk. If you would invest  8,769  in Leisure Fund Class on October 4, 2024 and sell it today you would lose (494.00) from holding Leisure Fund Class or give up 5.63% of portfolio value over 90 days.

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

Leisure Fund Class  vs.  Energy Focu

Leisure Fund Class

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Leisure Fund Class are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Leisure Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Energy Focu

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Focu are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Energy Focu is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Leisure Fund and Energy Focu

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

The idea behind Leisure Fund Class and Energy Focu 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 Commodity Directory module to find actively traded commodities issued by global exchanges.