Correlation Between Strategic Allocation and Pro Blend

Can any of the company-specific risk be diversified away by investing in both Strategic Allocation and Pro Blend 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 Pro Blend 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 Pro Blend Extended Term, you can compare the effects of market volatilities on Strategic Allocation and Pro Blend 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 Pro Blend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Allocation and Pro Blend.

Diversification Opportunities for Strategic Allocation and Pro Blend

0.61

Correlation Coefficient

Strategic Allocation  Pro Blend

Poor diversification

The 3 months correlation between Strategic and Pro is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Servative and Pro Blend Extended Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro Blend Extended 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 Pro Blend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro Blend Extended has no effect on the direction of Strategic Allocation i.e., Strategic Allocation and Pro Blend go up and down completely randomly.

Pair Corralation between Strategic Allocation and Pro Blend

Assuming the 90 days horizon Strategic Allocation Servative is expected to generate 0.82 times more return on investment than Pro Blend. However, Strategic Allocation Servative is 1.23 times less risky than Pro Blend. It trades about 0.11 of its potential returns per unit of risk. Pro Blend Extended Term is currently generating about 0.05 per unit of risk. If you would invest  571.00  in Strategic Allocation Servative on September 13, 2024 and sell it today you would earn a total of  12.00  from holding Strategic Allocation Servative or generate 2.1% return on investment over 90 days.

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

Strategic Allocation Servative  vs.  Pro Blend Extended Term

Strategic Allocation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Allocation Servative are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Strategic Allocation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pro Blend Extended

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Strategic Allocation and Pro Blend

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

The idea behind Strategic Allocation Servative and Pro Blend Extended Term 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.