Correlation Between Sextant Growth and Sextant Core

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

By analyzing existing cross correlation between Sextant Growth Fund and Sextant E Fund, you can compare the effects of market volatilities on Sextant Growth and Sextant Core 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 Sextant Growth with a short position of Sextant Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sextant Growth and Sextant Core.

Diversification Opportunities for Sextant Growth and Sextant Core

0.76

Correlation Coefficient

Sextant Growth  Sextant Core

Poor diversification

The 3 months correlation between Sextant and Sextant is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sextant Growth Fund and Sextant E Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sextant E Fund and Sextant Growth 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 Sextant Growth Fund are associated (or correlated) with Sextant Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sextant E Fund has no effect on the direction of Sextant Growth i.e., Sextant Growth and Sextant Core go up and down completely randomly.

Pair Corralation between Sextant Growth and Sextant Core

Assuming the 90 days horizon Sextant Growth Fund is expected to under-perform the Sextant Core. In addition to that, Sextant Growth is 2.02 times more volatile than Sextant E Fund. It trades about -0.13 of its total potential returns per unit of risk. Sextant E Fund is currently generating about -0.03 per unit of volatility. If you would invest  1,661  in Sextant E Fund on December 29, 2024 and sell it today you would lose (22.00) from holding Sextant E Fund or give up 1.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Sextant Growth Fund  vs.  Sextant E Fund

Sextant Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sextant Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Sextant E Fund

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sextant Growth and Sextant Core

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

The idea behind Sextant Growth Fund and Sextant E 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.