Correlation Between Strategic Asset and Blue Chip

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

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

Diversification Opportunities for Strategic Asset and Blue Chip

0.94

Correlation Coefficient

Strategic Asset  Blue Chip

Almost no diversification

The 3 months correlation between Strategic and Blue is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Asset Management and Blue Chip Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Chip Fund and Strategic Asset 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 Strategic Asset Management are associated (or correlated) with Blue Chip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Chip Fund has no effect on the direction of Strategic Asset i.e., Strategic Asset and Blue Chip go up and down completely randomly.

Pair Corralation between Strategic Asset and Blue Chip

Assuming the 90 days horizon Strategic Asset is expected to generate 1.85 times less return on investment than Blue Chip. But when comparing it to its historical volatility, Strategic Asset Management is 1.15 times less risky than Blue Chip. It trades about 0.08 of its potential returns per unit of risk. Blue Chip Fund is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,862  in Blue Chip Fund on September 5, 2024 and sell it today you would earn a total of  2,090  from holding Blue Chip Fund or generate 73.03% return on investment over 90 days.

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

Strategic Asset Management  vs.  Blue Chip Fund

Strategic Asset Mana

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Asset Management are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Strategic Asset may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Blue Chip Fund

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Chip Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Blue Chip may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Strategic Asset and Blue Chip

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

The idea behind Strategic Asset Management and Blue Chip Fund 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 Transaction History module to view history of all your transactions and understand their impact on performance.