Correlation Between Spectrum Advisors and Spectrum Low

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

By analyzing existing cross correlation between Spectrum Advisors Preferred and Spectrum Low Volatility, you can compare the effects of market volatilities on Spectrum Advisors and Spectrum Low 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 Spectrum Advisors with a short position of Spectrum Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spectrum Advisors and Spectrum Low.

Diversification Opportunities for Spectrum Advisors and Spectrum Low

0.26

Correlation Coefficient

Spectrum Advisors  Spectrum Low

Modest diversification

The 3 months correlation between Spectrum and Spectrum is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Advisors Preferred and Spectrum Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Low Volatility and Spectrum Advisors 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 Spectrum Advisors Preferred are associated (or correlated) with Spectrum Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Low Volatility has no effect on the direction of Spectrum Advisors i.e., Spectrum Advisors and Spectrum Low go up and down completely randomly.

Pair Corralation between Spectrum Advisors and Spectrum Low

Assuming the 90 days horizon Spectrum Advisors Preferred is expected to generate 5.0 times more return on investment than Spectrum Low. However, Spectrum Advisors is 5.0 times more volatile than Spectrum Low Volatility. It trades about 0.1 of its potential returns per unit of risk. Spectrum Low Volatility is currently generating about 0.03 per unit of risk. If you would invest  1,772  in Spectrum Advisors Preferred on September 5, 2024 and sell it today you would earn a total of  86.00  from holding Spectrum Advisors Preferred or generate 4.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Spectrum Advisors Preferred  vs.  Spectrum Low Volatility

Spectrum Advisors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spectrum Advisors Preferred are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Spectrum Advisors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Spectrum Low Volatility

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Spectrum Advisors and Spectrum Low

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

The idea behind Spectrum Advisors Preferred and Spectrum Low Volatility 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.