Correlation Between Smead Value and Short Duration

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

By analyzing existing cross correlation between Smead Value Fund and Short Duration Income, you can compare the effects of market volatilities on Smead Value and Short Duration 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 Smead Value with a short position of Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smead Value and Short Duration.

Diversification Opportunities for Smead Value and Short Duration

0.0

Correlation Coefficient

Smead Value  Short Duration

Pay attention - limited upside

The 3 months correlation between Smead and Short is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Smead Value Fund and Short Duration Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Income and Smead Value 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 Smead Value Fund are associated (or correlated) with Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Income has no effect on the direction of Smead Value i.e., Smead Value and Short Duration go up and down completely randomly.

Pair Corralation between Smead Value and Short Duration

If you would invest (100.00) in Short Duration Income on December 28, 2024 and sell it today you would earn a total of  100.00  from holding Short Duration Income or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Smead Value Fund  vs.  Short Duration Income

Smead Value Fund

Risk-Adjusted Performance

Very Weak

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

Short Duration Income

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Smead Value and Short Duration

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

The idea behind Smead Value Fund and Short Duration 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.