Correlation Between Moderately Aggressive and Counterpoint Tactical

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

By analyzing existing cross correlation between Moderately Aggressive Balanced and Counterpoint Tactical Equity, you can compare the effects of market volatilities on Moderately Aggressive and Counterpoint Tactical 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 Moderately Aggressive with a short position of Counterpoint Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderately Aggressive and Counterpoint Tactical.

Diversification Opportunities for Moderately Aggressive and Counterpoint Tactical

0.82

Correlation Coefficient

Moderately Aggressive  Counterpoint Tactical

Very poor diversification

The 3 months correlation between Moderately and Counterpoint is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Moderately Aggressive Balanced and Counterpoint Tactical Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Counterpoint Tactical and Moderately Aggressive 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 Moderately Aggressive Balanced are associated (or correlated) with Counterpoint Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Counterpoint Tactical has no effect on the direction of Moderately Aggressive i.e., Moderately Aggressive and Counterpoint Tactical go up and down completely randomly.

Pair Corralation between Moderately Aggressive and Counterpoint Tactical

Assuming the 90 days horizon Moderately Aggressive Balanced is expected to under-perform the Counterpoint Tactical. But the mutual fund apears to be less risky and, when comparing its historical volatility, Moderately Aggressive Balanced is 1.22 times less risky than Counterpoint Tactical. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Counterpoint Tactical Equity is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,211  in Counterpoint Tactical Equity on December 25, 2024 and sell it today you would earn a total of  3.00  from holding Counterpoint Tactical Equity or generate 0.14% return on investment over 90 days.

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

Moderately Aggressive Balanced  vs.  Counterpoint Tactical Equity

Moderately Aggressive

Risk-Adjusted Performance

Very Weak

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

Counterpoint Tactical

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Moderately Aggressive and Counterpoint Tactical

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

The idea behind Moderately Aggressive Balanced and Counterpoint Tactical Equity 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.