Correlation Between Sierra Core and Stralem Equity

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

Diversification Opportunities for Sierra Core and Stralem Equity

0.66

Correlation Coefficient

Sierra Core  Stralem Equity

Poor diversification

The 3 months correlation between Sierra and STRALEM is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Stralem Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stralem Equity 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 Stralem Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stralem Equity has no effect on the direction of Sierra Core i.e., Sierra Core and Stralem Equity go up and down completely randomly.

Pair Corralation between Sierra Core and Stralem Equity

Assuming the 90 days horizon Sierra E Retirement is expected to under-perform the Stralem Equity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sierra E Retirement is 2.03 times less risky than Stralem Equity. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Stralem Equity Fund is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,034  in Stralem Equity Fund on December 21, 2024 and sell it today you would earn a total of  79.00  from holding Stralem Equity Fund or generate 2.6% return on investment over 90 days.

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

Sierra E Retirement  vs.  Stralem Equity Fund

Sierra E Retirement

Risk-Adjusted Performance

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.

Stralem Equity

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stralem Equity Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Stralem Equity 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 Stralem Equity

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

The idea behind Sierra E Retirement and Stralem Equity Fund 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.