Correlation Between Sentinel Common and Growth Opportunities

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

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

Diversification Opportunities for Sentinel Common and Growth Opportunities

0.49

Correlation Coefficient

Sentinel Common  Growth Opportunities

Very weak diversification

The 3 months correlation between Sentinel and Growth is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel Mon Stock and Growth Opportunities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Opportunities and Sentinel Common 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 Mon Stock are associated (or correlated) with Growth Opportunities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Opportunities has no effect on the direction of Sentinel Common i.e., Sentinel Common and Growth Opportunities go up and down completely randomly.

Pair Corralation between Sentinel Common and Growth Opportunities

Assuming the 90 days horizon Sentinel Mon Stock is expected to generate 0.63 times more return on investment than Growth Opportunities. However, Sentinel Mon Stock is 1.6 times less risky than Growth Opportunities. It trades about 0.0 of its potential returns per unit of risk. Growth Opportunities Fund is currently generating about -0.08 per unit of risk. If you would invest  6,475  in Sentinel Mon Stock on November 28, 2024 and sell it today you would lose (14.00) from holding Sentinel Mon Stock or give up 0.22% of portfolio value over 90 days.

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

Sentinel Mon Stock  vs.  Growth Opportunities Fund

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 fundamental indicators, Sentinel Common is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Growth Opportunities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Growth Opportunities Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Sentinel Common and Growth Opportunities

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

The idea behind Sentinel Mon Stock and Growth Opportunities Fund 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.