Correlation Between Sentinel Balanced and Sentinel Common

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

By analyzing existing cross correlation between Sentinel Balanced Fund and Sentinel Mon Stock, you can compare the effects of market volatilities on Sentinel Balanced and Sentinel Common 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 Sentinel Balanced with a short position of Sentinel Common. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sentinel Balanced and Sentinel Common.

Diversification Opportunities for Sentinel Balanced and Sentinel Common

0.97

Correlation Coefficient

Sentinel Balanced  Sentinel Common

Almost no diversification

The 3 months correlation between Sentinel and Sentinel is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel Balanced Fund and Sentinel Mon Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentinel Mon Stock and Sentinel Balanced 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 Sentinel Balanced Fund are associated (or correlated) with Sentinel Common. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentinel Mon Stock has no effect on the direction of Sentinel Balanced i.e., Sentinel Balanced and Sentinel Common go up and down completely randomly.

Pair Corralation between Sentinel Balanced and Sentinel Common

Assuming the 90 days horizon Sentinel Balanced Fund is expected to generate 0.63 times more return on investment than Sentinel Common. However, Sentinel Balanced Fund is 1.6 times less risky than Sentinel Common. It trades about -0.05 of its potential returns per unit of risk. Sentinel Mon Stock is currently generating about -0.07 per unit of risk. If you would invest  2,804  in Sentinel Balanced Fund on December 30, 2024 and sell it today you would lose (59.00) from holding Sentinel Balanced Fund or give up 2.1% of portfolio value over 90 days.

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

Sentinel Balanced Fund  vs.  Sentinel Mon Stock

Sentinel Balanced

Risk-Adjusted Performance

Very Weak

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

Sentinel Mon Stock

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sentinel Balanced and Sentinel Common

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

The idea behind Sentinel Balanced Fund and Sentinel Mon Stock 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.