Correlation Between Strategic Allocation and Sierra Tactical

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

Diversification Opportunities for Strategic Allocation and Sierra Tactical

0.85

Correlation Coefficient

Strategic Allocation  Sierra Tactical

Very poor diversification

The 3 months correlation between Strategic and Sierra is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Servative and Sierra Tactical Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Tactical Risk 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 Sierra Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Tactical Risk has no effect on the direction of Strategic Allocation i.e., Strategic Allocation and Sierra Tactical go up and down completely randomly.

Pair Corralation between Strategic Allocation and Sierra Tactical

Assuming the 90 days horizon Strategic Allocation Servative is expected to under-perform the Sierra Tactical. In addition to that, Strategic Allocation is 1.13 times more volatile than Sierra Tactical Risk. It trades about -0.12 of its total potential returns per unit of risk. Sierra Tactical Risk is currently generating about -0.11 per unit of volatility. If you would invest  2,902  in Sierra Tactical Risk on December 2, 2024 and sell it today you would lose (118.00) from holding Sierra Tactical Risk or give up 4.07% of portfolio value over 90 days.

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

Strategic Allocation Servative  vs.  Sierra Tactical Risk

Strategic Allocation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Strategic Allocation Servative has generated negative risk-adjusted returns adding no value to fund investors. 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.

Sierra Tactical Risk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sierra Tactical Risk has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking indicators, Sierra Tactical 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 Sierra Tactical

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

The idea behind Strategic Allocation Servative and Sierra Tactical Risk 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.