Correlation Between NewFunds Low and Coronation Top

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

By analyzing existing cross correlation between NewFunds Low Volatility and Coronation Top 20, you can compare the effects of market volatilities on NewFunds Low and Coronation Top 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 NewFunds Low with a short position of Coronation Top. Check out your portfolio center. Please also check ongoing floating volatility patterns of NewFunds Low and Coronation Top.

Diversification Opportunities for NewFunds Low and Coronation Top

0.81

Correlation Coefficient

NewFunds Low  Coronation Top

Very poor diversification

The 3 months correlation between NewFunds and Coronation is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding NewFunds Low Volatility and Coronation Top 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Top 20 and NewFunds Low 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 NewFunds Low Volatility are associated (or correlated) with Coronation Top. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coronation Top 20 has no effect on the direction of NewFunds Low i.e., NewFunds Low and Coronation Top go up and down completely randomly.

Pair Corralation between NewFunds Low and Coronation Top

Assuming the 90 days trading horizon NewFunds Low Volatility is expected to generate 0.76 times more return on investment than Coronation Top. However, NewFunds Low Volatility is 1.31 times less risky than Coronation Top. It trades about 0.13 of its potential returns per unit of risk. Coronation Top 20 is currently generating about 0.05 per unit of risk. If you would invest  120,600  in NewFunds Low Volatility on September 16, 2024 and sell it today you would earn a total of  6,000  from holding NewFunds Low Volatility or generate 4.98% return on investment over 90 days.

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

NewFunds Low Volatility  vs.  Coronation Top 20

NewFunds Low Volatility

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NewFunds Low Volatility are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, NewFunds Low is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Coronation Top 20

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Top 20 are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Coronation Top is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NewFunds Low and Coronation Top

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

The idea behind NewFunds Low Volatility and Coronation Top 20 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 Anywhere module to track or share privately all of your investments from the convenience of any device.