Correlation Between Sierra Core and Catalyst Hedged

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

By analyzing existing cross correlation between Sierra E Retirement and Catalyst Hedged Modity, you can compare the effects of market volatilities on Sierra Core and Catalyst Hedged 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 Sierra Core with a short position of Catalyst Hedged. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra Core and Catalyst Hedged.

Diversification Opportunities for Sierra Core and Catalyst Hedged

0.52

Correlation Coefficient

Sierra Core  Catalyst Hedged

Very weak diversification

The 3 months correlation between Sierra and Catalyst is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Catalyst Hedged Modity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Hedged Modity and Sierra Core 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 Sierra E Retirement are associated (or correlated) with Catalyst Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Hedged Modity has no effect on the direction of Sierra Core i.e., Sierra Core and Catalyst Hedged go up and down completely randomly.

Pair Corralation between Sierra Core and Catalyst Hedged

Assuming the 90 days horizon Sierra E Retirement is expected to generate 0.49 times more return on investment than Catalyst Hedged. However, Sierra E Retirement is 2.05 times less risky than Catalyst Hedged. It trades about -0.16 of its potential returns per unit of risk. Catalyst Hedged Modity is currently generating about -0.18 per unit of risk. If you would invest  2,319  in Sierra E Retirement on October 9, 2024 and sell it today you would lose (63.00) from holding Sierra E Retirement or give up 2.72% of portfolio value over 90 days.

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

Sierra E Retirement  vs.  Catalyst Hedged Modity

Sierra E Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

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

Catalyst Hedged Modity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catalyst Hedged Modity 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 Sierra Core and Catalyst Hedged

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

The idea behind Sierra E Retirement and Catalyst Hedged Modity 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.