Correlation Between AdvisorShares and KFA Mount

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

By analyzing existing cross correlation between AdvisorShares and KFA Mount Lucas, you can compare the effects of market volatilities on AdvisorShares and KFA Mount 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 AdvisorShares with a short position of KFA Mount. Check out your portfolio center. Please also check ongoing floating volatility patterns of AdvisorShares and KFA Mount.

Diversification Opportunities for AdvisorShares and KFA Mount

-0.53

Correlation Coefficient

AdvisorShares  KFA Mount

Excellent diversification

The 3 months correlation between AdvisorShares and KFA is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding AdvisorShares and KFA Mount Lucas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KFA Mount Lucas and AdvisorShares 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 AdvisorShares are associated (or correlated) with KFA Mount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KFA Mount Lucas has no effect on the direction of AdvisorShares i.e., AdvisorShares and KFA Mount go up and down completely randomly.

Pair Corralation between AdvisorShares and KFA Mount

If you would invest  2,797  in KFA Mount Lucas on September 20, 2024 and sell it today you would earn a total of  56.00  from holding KFA Mount Lucas or generate 2.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

AdvisorShares  vs.  KFA Mount Lucas

AdvisorShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AdvisorShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AdvisorShares is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

KFA Mount Lucas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KFA Mount Lucas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, KFA Mount is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with AdvisorShares and KFA Mount

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

The idea behind AdvisorShares and KFA Mount Lucas 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.