Correlation Between Moderate Balanced and Keeley Small

Can any of the company-specific risk be diversified away by investing in both Moderate Balanced and Keeley Small 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 Keeley Small 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 Keeley Small Cap, you can compare the effects of market volatilities on Moderate Balanced and Keeley Small 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 Keeley Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderate Balanced and Keeley Small.

Diversification Opportunities for Moderate Balanced and Keeley Small

0.87

Correlation Coefficient

Moderate Balanced  Keeley Small

Very poor diversification

The 3 months correlation between Moderate and Keeley is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Moderate Balanced Allocation and Keeley Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keeley Small 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 Keeley Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keeley Small Cap has no effect on the direction of Moderate Balanced i.e., Moderate Balanced and Keeley Small go up and down completely randomly.

Pair Corralation between Moderate Balanced and Keeley Small

Assuming the 90 days horizon Moderate Balanced Allocation is expected to generate 0.23 times more return on investment than Keeley Small. However, Moderate Balanced Allocation is 4.41 times less risky than Keeley Small. It trades about 0.12 of its potential returns per unit of risk. Keeley Small Cap is currently generating about -0.13 per unit of risk. If you would invest  1,178  in Moderate Balanced Allocation on October 24, 2024 and sell it today you would earn a total of  14.00  from holding Moderate Balanced Allocation or generate 1.19% return on investment over 90 days.

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

Moderate Balanced Allocation  vs.  Keeley Small Cap

Moderate Balanced

Risk-Adjusted Performance

0 of 100

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.

Keeley Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Moderate Balanced and Keeley Small

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

The idea behind Moderate Balanced Allocation and Keeley Small 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.