Correlation Between Sierra Core and Deutsche Short

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

Diversification Opportunities for Sierra Core and Deutsche Short

0.46

Correlation Coefficient

Sierra Core  Deutsche Short

Very weak diversification

The 3 months correlation between Sierra and Deutsche is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Deutsche Short Term Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Short Term 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 Deutsche Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Short Term has no effect on the direction of Sierra Core i.e., Sierra Core and Deutsche Short go up and down completely randomly.

Pair Corralation between Sierra Core and Deutsche Short

Assuming the 90 days horizon Sierra E Retirement is expected to generate 3.1 times more return on investment than Deutsche Short. However, Sierra Core is 3.1 times more volatile than Deutsche Short Term Municipal. It trades about 0.05 of its potential returns per unit of risk. Deutsche Short Term Municipal is currently generating about 0.13 per unit of risk. If you would invest  2,136  in Sierra E Retirement on October 25, 2024 and sell it today you would earn a total of  162.00  from holding Sierra E Retirement or generate 7.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Sierra E Retirement  vs.  Deutsche Short Term Municipal

Sierra E Retirement

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sierra E Retirement are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. 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.

Deutsche Short Term

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Short Term Municipal are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Deutsche Short 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 Core and Deutsche Short

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

The idea behind Sierra E Retirement and Deutsche Short Term Municipal 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.