Correlation Between Technology Fund and Steelpath Select

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

By analyzing existing cross correlation between Technology Fund Class and Steelpath Select 40, you can compare the effects of market volatilities on Technology Fund and Steelpath Select 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 Technology Fund with a short position of Steelpath Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Fund and Steelpath Select.

Diversification Opportunities for Technology Fund and Steelpath Select

0.79

Correlation Coefficient

Technology Fund  Steelpath Select

Poor diversification

The 3 months correlation between Technology and Steelpath is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Technology Fund Class and Steelpath Select 40 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steelpath Select and Technology 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 Technology Fund Class are associated (or correlated) with Steelpath Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steelpath Select has no effect on the direction of Technology Fund i.e., Technology Fund and Steelpath Select go up and down completely randomly.

Pair Corralation between Technology Fund and Steelpath Select

Assuming the 90 days horizon Technology Fund is expected to generate 3.05 times less return on investment than Steelpath Select. In addition to that, Technology Fund is 1.57 times more volatile than Steelpath Select 40. It trades about 0.03 of its total potential returns per unit of risk. Steelpath Select 40 is currently generating about 0.14 per unit of volatility. If you would invest  706.00  in Steelpath Select 40 on October 8, 2024 and sell it today you would earn a total of  56.00  from holding Steelpath Select 40 or generate 7.93% return on investment over 90 days.

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

Technology Fund Class  vs.  Steelpath Select 40

Technology Fund Class

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Fund Class are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Technology Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Steelpath Select

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steelpath Select 40 are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Steelpath Select may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Technology Fund and Steelpath Select

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

The idea behind Technology Fund Class and Steelpath Select 40 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.