Correlation Between Balanced Fund and Ariel Focus

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

By analyzing existing cross correlation between Balanced Fund Investor and Ariel Focus Fund, you can compare the effects of market volatilities on Balanced Fund and Ariel Focus 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 Balanced Fund with a short position of Ariel Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Ariel Focus.

Diversification Opportunities for Balanced Fund and Ariel Focus

0.0

Correlation Coefficient

Balanced Fund  Ariel Focus

Pay attention - limited upside

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

Pair Corralation between Balanced Fund and Ariel Focus

If you would invest (100.00) in Ariel Focus Fund on December 27, 2024 and sell it today you would earn a total of  100.00  from holding Ariel Focus Fund 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

Balanced Fund Investor  vs.  Ariel Focus Fund

Balanced Fund Investor

Risk-Adjusted Performance

Very Weak

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

Ariel Focus Fund

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Balanced Fund and Ariel Focus

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

The idea behind Balanced Fund Investor and Ariel Focus 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.