Correlation Between Spectrum Unconstrained and Kensington Managed

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

By analyzing existing cross correlation between Spectrum Unconstrained and Kensington Managed Income, you can compare the effects of market volatilities on Spectrum Unconstrained and Kensington Managed 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 Spectrum Unconstrained with a short position of Kensington Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spectrum Unconstrained and Kensington Managed.

Diversification Opportunities for Spectrum Unconstrained and Kensington Managed

0.4

Correlation Coefficient

Spectrum Unconstrained  Kensington Managed

Very weak diversification

The 3 months correlation between Spectrum and Kensington is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Unconstrained and Kensington Managed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Managed Income and Spectrum 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 Spectrum Unconstrained are associated (or correlated) with Kensington Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Managed Income has no effect on the direction of Spectrum Unconstrained i.e., Spectrum Unconstrained and Kensington Managed go up and down completely randomly.

Pair Corralation between Spectrum Unconstrained and Kensington Managed

Assuming the 90 days horizon Spectrum Unconstrained is expected to generate 1.14 times less return on investment than Kensington Managed. In addition to that, Spectrum Unconstrained is 1.35 times more volatile than Kensington Managed Income. It trades about 0.09 of its total potential returns per unit of risk. Kensington Managed Income is currently generating about 0.14 per unit of volatility. If you would invest  981.00  in Kensington Managed Income on September 5, 2024 and sell it today you would earn a total of  15.00  from holding Kensington Managed Income or generate 1.53% return on investment over 90 days.

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

Spectrum Unconstrained  vs.  Kensington Managed Income

Spectrum Unconstrained

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spectrum Unconstrained are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Spectrum Unconstrained is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kensington Managed Income

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kensington Managed Income are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Kensington Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Spectrum Unconstrained and Kensington Managed

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

The idea behind Spectrum Unconstrained and Kensington Managed Income 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.