Correlation Between Timothy Plan and World Energy

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

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

Diversification Opportunities for Timothy Plan and World Energy

-0.33

Correlation Coefficient

Timothy Plan  World Energy

Very good diversification

The 3 months correlation between Timothy and World is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Timothy Plan Defensive and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy and Timothy Plan 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 Plan Defensive are associated (or correlated) with World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Timothy Plan i.e., Timothy Plan and World Energy go up and down completely randomly.

Pair Corralation between Timothy Plan and World Energy

Assuming the 90 days horizon Timothy Plan Defensive is expected to under-perform the World Energy. But the mutual fund apears to be less risky and, when comparing its historical volatility, Timothy Plan Defensive is 2.58 times less risky than World Energy. The mutual fund trades about -0.1 of its potential returns per unit of risk. The World Energy Fund is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,314  in World Energy Fund on September 15, 2024 and sell it today you would earn a total of  163.00  from holding World Energy Fund or generate 12.4% return on investment over 90 days.

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

Timothy Plan Defensive  vs.  World Energy Fund

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 fundamental indicators, Timothy Plan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

World Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in World Energy Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, World Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Timothy Plan and World Energy

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

The idea behind Timothy Plan Defensive and World Energy Fund 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.