Correlation Between Timothy Largemid and Timothy Plan

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

By analyzing existing cross correlation between Timothy Largemid Cap Value and Timothy Plan Defensive, you can compare the effects of market volatilities on Timothy Largemid and Timothy Plan 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 Timothy Largemid with a short position of Timothy Plan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timothy Largemid and Timothy Plan.

Diversification Opportunities for Timothy Largemid and Timothy Plan

0.62

Correlation Coefficient

Timothy Largemid  Timothy Plan

Poor diversification

The 3 months correlation between Timothy and Timothy is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Timothy Largemid Cap Value and Timothy Plan Defensive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Plan Defensive and Timothy Largemid 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 Timothy Largemid Cap Value are associated (or correlated) with Timothy Plan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Plan Defensive has no effect on the direction of Timothy Largemid i.e., Timothy Largemid and Timothy Plan go up and down completely randomly.

Pair Corralation between Timothy Largemid and Timothy Plan

Assuming the 90 days horizon Timothy Largemid Cap Value is expected to under-perform the Timothy Plan. In addition to that, Timothy Largemid is 2.52 times more volatile than Timothy Plan Defensive. It trades about -0.12 of its total potential returns per unit of risk. Timothy Plan Defensive is currently generating about -0.11 per unit of volatility. If you would invest  1,462  in Timothy Plan Defensive on September 14, 2024 and sell it today you would lose (53.00) from holding Timothy Plan Defensive or give up 3.63% of portfolio value over 90 days.

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

Timothy Largemid Cap Value  vs.  Timothy Plan Defensive

Timothy Largemid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timothy Largemid Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Timothy Plan Defensive

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Timothy Largemid and Timothy Plan

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

The idea behind Timothy Largemid Cap Value and Timothy Plan Defensive 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.