Correlation Between Fundamental Large and Aristotle Funds

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

By analyzing existing cross correlation between Fundamental Large Cap and Aristotle Funds Series, you can compare the effects of market volatilities on Fundamental Large and Aristotle Funds 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 Fundamental Large with a short position of Aristotle Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundamental Large and Aristotle Funds.

Diversification Opportunities for Fundamental Large and Aristotle Funds

0.89

Correlation Coefficient

Fundamental Large  Aristotle Funds

Very poor diversification

The 3 months correlation between Fundamental and Aristotle is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and Aristotle Funds Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristotle Funds Series and Fundamental Large 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 Fundamental Large Cap are associated (or correlated) with Aristotle Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristotle Funds Series has no effect on the direction of Fundamental Large i.e., Fundamental Large and Aristotle Funds go up and down completely randomly.

Pair Corralation between Fundamental Large and Aristotle Funds

Assuming the 90 days horizon Fundamental Large Cap is expected to generate 0.87 times more return on investment than Aristotle Funds. However, Fundamental Large Cap is 1.15 times less risky than Aristotle Funds. It trades about 0.07 of its potential returns per unit of risk. Aristotle Funds Series is currently generating about 0.04 per unit of risk. If you would invest  6,481  in Fundamental Large Cap on October 10, 2024 and sell it today you would earn a total of  232.00  from holding Fundamental Large Cap or generate 3.58% return on investment over 90 days.

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

Fundamental Large Cap  vs.  Aristotle Funds Series

Fundamental Large Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fundamental Large Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fundamental Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aristotle Funds Series

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Fundamental Large and Aristotle Funds

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

The idea behind Fundamental Large Cap and Aristotle Funds Series 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.