Correlation Between Moderate Balanced and Dana Large

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

By analyzing existing cross correlation between Moderate Balanced Allocation and Dana Large Cap, you can compare the effects of market volatilities on Moderate Balanced and Dana Large 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 Moderate Balanced with a short position of Dana Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderate Balanced and Dana Large.

Diversification Opportunities for Moderate Balanced and Dana Large

0.65

Correlation Coefficient

Moderate Balanced  Dana Large

Poor diversification

The 3 months correlation between Moderate and Dana is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Moderate Balanced Allocation and Dana Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana Large Cap and Moderate 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 Moderate Balanced Allocation are associated (or correlated) with Dana Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Large Cap has no effect on the direction of Moderate Balanced i.e., Moderate Balanced and Dana Large go up and down completely randomly.

Pair Corralation between Moderate Balanced and Dana Large

Assuming the 90 days horizon Moderate Balanced Allocation is expected to generate 0.37 times more return on investment than Dana Large. However, Moderate Balanced Allocation is 2.71 times less risky than Dana Large. It trades about 0.05 of its potential returns per unit of risk. Dana Large Cap is currently generating about -0.01 per unit of risk. If you would invest  1,124  in Moderate Balanced Allocation on October 9, 2024 and sell it today you would earn a total of  58.00  from holding Moderate Balanced Allocation or generate 5.16% return on investment over 90 days.

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

Moderate Balanced Allocation  vs.  Dana Large Cap

Moderate Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dana Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dana Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Moderate Balanced and Dana Large

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

The idea behind Moderate Balanced Allocation and Dana Large Cap 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.