Correlation Between Scout Unconstrained and Litman Gregory

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

By analyzing existing cross correlation between Scout Unconstrained Bond and Litman Gregory Masters, you can compare the effects of market volatilities on Scout Unconstrained and Litman Gregory 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 Scout Unconstrained with a short position of Litman Gregory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scout Unconstrained and Litman Gregory.

Diversification Opportunities for Scout Unconstrained and Litman Gregory

0.84

Correlation Coefficient

Scout Unconstrained  Litman Gregory

Very poor diversification

The 3 months correlation between Scout and Litman is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Scout Unconstrained Bond and Litman Gregory Masters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Masters and Scout Unconstrained 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 Scout Unconstrained Bond are associated (or correlated) with Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Masters has no effect on the direction of Scout Unconstrained i.e., Scout Unconstrained and Litman Gregory go up and down completely randomly.

Pair Corralation between Scout Unconstrained and Litman Gregory

Assuming the 90 days horizon Scout Unconstrained is expected to generate 5.43 times less return on investment than Litman Gregory. But when comparing it to its historical volatility, Scout Unconstrained Bond is 6.71 times less risky than Litman Gregory. It trades about 0.06 of its potential returns per unit of risk. Litman Gregory Masters is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  864.00  in Litman Gregory Masters on October 4, 2024 and sell it today you would earn a total of  296.00  from holding Litman Gregory Masters or generate 34.26% return on investment over 90 days.

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

Scout Unconstrained Bond  vs.  Litman Gregory Masters

Scout Unconstrained Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scout Unconstrained Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Scout Unconstrained is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Litman Gregory Masters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Litman Gregory Masters has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest abnormal 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.

Pair Trading with Scout Unconstrained and Litman Gregory

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

The idea behind Scout Unconstrained Bond and Litman Gregory Masters 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.