Correlation Between Sierra Core and Caldwell Orkin

Can any of the company-specific risk be diversified away by investing in both Sierra Core and Caldwell Orkin 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 Caldwell Orkin 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 Caldwell Orkin Market, you can compare the effects of market volatilities on Sierra Core and Caldwell Orkin 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 Caldwell Orkin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra Core and Caldwell Orkin.

Diversification Opportunities for Sierra Core and Caldwell Orkin

0.36

Correlation Coefficient

Sierra Core  Caldwell Orkin

Weak diversification

The 3 months correlation between Sierra and Caldwell is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Caldwell Orkin Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caldwell Orkin Market 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 Caldwell Orkin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caldwell Orkin Market has no effect on the direction of Sierra Core i.e., Sierra Core and Caldwell Orkin go up and down completely randomly.

Pair Corralation between Sierra Core and Caldwell Orkin

Assuming the 90 days horizon Sierra E Retirement is expected to under-perform the Caldwell Orkin. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sierra E Retirement is 2.05 times less risky than Caldwell Orkin. The mutual fund trades about -0.28 of its potential returns per unit of risk. The Caldwell Orkin Market is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  5,279  in Caldwell Orkin Market on October 9, 2024 and sell it today you would lose (133.00) from holding Caldwell Orkin Market or give up 2.52% of portfolio value over 90 days.

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

Sierra E Retirement  vs.  Caldwell Orkin Market

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.

Caldwell Orkin Market

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caldwell Orkin Market are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Caldwell Orkin may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sierra Core and Caldwell Orkin

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

The idea behind Sierra E Retirement and Caldwell Orkin Market 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.