Correlation Between Strategic Allocation and Sustainable Equity
Can any of the company-specific risk be diversified away by investing in both Strategic Allocation and Sustainable Equity 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 Strategic Allocation and Sustainable Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Allocation Servative and Sustainable Equity Fund, you can compare the effects of market volatilities on Strategic Allocation and Sustainable Equity 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 Strategic Allocation with a short position of Sustainable Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Allocation and Sustainable Equity.
Diversification Opportunities for Strategic Allocation and Sustainable Equity
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Strategic and Sustainable is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Servative and Sustainable Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sustainable Equity and Strategic Allocation 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 Strategic Allocation Servative are associated (or correlated) with Sustainable Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sustainable Equity has no effect on the direction of Strategic Allocation i.e., Strategic Allocation and Sustainable Equity go up and down completely randomly.
Pair Corralation between Strategic Allocation and Sustainable Equity
Assuming the 90 days horizon Strategic Allocation Servative is expected to under-perform the Sustainable Equity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Strategic Allocation Servative is 1.56 times less risky than Sustainable Equity. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Sustainable Equity Fund is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 5,606 in Sustainable Equity Fund on September 23, 2024 and sell it today you would lose (269.00) from holding Sustainable Equity Fund or give up 4.8% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Strategic Allocation Servative vs. Sustainable Equity Fund
Performance |
Timeline |
Strategic Allocation |
Sustainable Equity |
Strategic Allocation and Sustainable Equity Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Strategic Allocation and Sustainable Equity
The main advantage of trading using opposite Strategic Allocation and Sustainable Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Allocation position performs unexpectedly, Sustainable Equity 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 Sustainable Equity will offset losses from the drop in Sustainable Equity's long position.Strategic Allocation vs. Mid Cap Value | Strategic Allocation vs. Equity Growth Fund | Strategic Allocation vs. Income Growth Fund | Strategic Allocation vs. Diversified Bond Fund |
Sustainable Equity vs. Disciplined Growth Fund | Sustainable Equity vs. Focused Dynamic Growth | Sustainable Equity vs. Small Cap Growth | Sustainable Equity vs. Mid Cap Value |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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