Correlation Between Sierra E and Fundamental Large

Can any of the company-specific risk be diversified away by investing in both Sierra E and Fundamental Large 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 E and Fundamental Large 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 Fundamental Large Cap, you can compare the effects of market volatilities on Sierra E and Fundamental Large 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 E with a short position of Fundamental Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra E and Fundamental Large.

Diversification Opportunities for Sierra E and Fundamental Large

0.79

Correlation Coefficient

Sierra E  Fundamental Large

Poor diversification

The 3 months correlation between Sierra and Fundamental is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Fundamental Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Large Cap and Sierra E 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 Fundamental Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Large Cap has no effect on the direction of Sierra E i.e., Sierra E and Fundamental Large go up and down completely randomly.

Pair Corralation between Sierra E and Fundamental Large

Assuming the 90 days horizon Sierra E Retirement is expected to generate 0.27 times more return on investment than Fundamental Large. However, Sierra E Retirement is 3.75 times less risky than Fundamental Large. It trades about 0.02 of its potential returns per unit of risk. Fundamental Large Cap is currently generating about -0.06 per unit of risk. If you would invest  2,279  in Sierra E Retirement on October 24, 2024 and sell it today you would earn a total of  7.00  from holding Sierra E Retirement or generate 0.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Sierra E Retirement  vs.  Fundamental Large Cap

Sierra E Retirement

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sierra E Retirement are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Sierra E is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fundamental Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sierra E and Fundamental Large

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

The idea behind Sierra E Retirement and Fundamental Large 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.