Correlation Between Sarofim Equity and Eventide Large

Can any of the company-specific risk be diversified away by investing in both Sarofim Equity and Eventide 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 Sarofim Equity and Eventide Large into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sarofim Equity and Eventide Large Cap, you can compare the effects of market volatilities on Sarofim Equity and Eventide 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 Sarofim Equity with a short position of Eventide Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sarofim Equity and Eventide Large.

Diversification Opportunities for Sarofim Equity and Eventide Large

0.78

Correlation Coefficient

Sarofim Equity  Eventide Large

Poor diversification

The 3 months correlation between Sarofim and Eventide is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sarofim Equity and Eventide Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eventide Large Cap and Sarofim Equity 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 Sarofim Equity are associated (or correlated) with Eventide Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eventide Large Cap has no effect on the direction of Sarofim Equity i.e., Sarofim Equity and Eventide Large go up and down completely randomly.

Pair Corralation between Sarofim Equity and Eventide Large

Assuming the 90 days horizon Sarofim Equity is expected to generate 7.27 times less return on investment than Eventide Large. In addition to that, Sarofim Equity is 1.11 times more volatile than Eventide Large Cap. It trades about 0.01 of its total potential returns per unit of risk. Eventide Large Cap is currently generating about 0.08 per unit of volatility. If you would invest  1,033  in Eventide Large Cap on October 22, 2024 and sell it today you would earn a total of  419.00  from holding Eventide Large Cap or generate 40.56% return on investment over 90 days.

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

Sarofim Equity  vs.  Eventide Large Cap

Sarofim Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarofim Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Eventide Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eventide Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Eventide 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 Sarofim Equity and Eventide Large

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

The idea behind Sarofim Equity and Eventide 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 Stocks Directory module to find actively traded stocks across global markets.