Correlation Between Stone Ridge and Victory Diversified

Can any of the company-specific risk be diversified away by investing in both Stone Ridge and Victory Diversified 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 Stone Ridge and Victory Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stone Ridge Diversified and Victory Diversified Stock, you can compare the effects of market volatilities on Stone Ridge and Victory Diversified 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 Stone Ridge with a short position of Victory Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Victory Diversified.

Diversification Opportunities for Stone Ridge and Victory Diversified

-0.45

Correlation Coefficient

Stone Ridge  Victory Diversified

Very good diversification

The 3 months correlation between Stone and Victory is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge Diversified and Victory Diversified Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Diversified Stock and Stone Ridge 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 Stone Ridge Diversified are associated (or correlated) with Victory Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Diversified Stock has no effect on the direction of Stone Ridge i.e., Stone Ridge and Victory Diversified go up and down completely randomly.

Pair Corralation between Stone Ridge and Victory Diversified

Assuming the 90 days horizon Stone Ridge is expected to generate 1.75 times less return on investment than Victory Diversified. But when comparing it to its historical volatility, Stone Ridge Diversified is 5.32 times less risky than Victory Diversified. It trades about 0.14 of its potential returns per unit of risk. Victory Diversified Stock is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,640  in Victory Diversified Stock on October 10, 2024 and sell it today you would earn a total of  201.00  from holding Victory Diversified Stock or generate 12.26% return on investment over 90 days.

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

Stone Ridge Diversified  vs.  Victory Diversified Stock

Stone Ridge Diversified

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge Diversified are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Stone Ridge is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Victory Diversified Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Victory Diversified Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental 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 Stone Ridge and Victory Diversified

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

The idea behind Stone Ridge Diversified and Victory Diversified Stock 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.