Correlation Between Value Fund and Sierra Tactical

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

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

Diversification Opportunities for Value Fund and Sierra Tactical

0.2

Correlation Coefficient

Value Fund  Sierra Tactical

Modest diversification

The 3 months correlation between Value and Sierra is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Investor 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 Value 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 Value Fund Investor 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 Value Fund i.e., Value Fund and Sierra Tactical go up and down completely randomly.

Pair Corralation between Value Fund and Sierra Tactical

Assuming the 90 days horizon Value Fund Investor is expected to generate 1.18 times more return on investment than Sierra Tactical. However, Value Fund is 1.18 times more volatile than Sierra Tactical Risk. It trades about 0.11 of its potential returns per unit of risk. Sierra Tactical Risk is currently generating about -0.04 per unit of risk. If you would invest  766.00  in Value Fund Investor on December 28, 2024 and sell it today you would earn a total of  34.00  from holding Value Fund Investor or generate 4.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Value Fund Investor  vs.  Sierra Tactical Risk

Value Fund Investor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund Investor are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Value Fund 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 Value Fund and Sierra Tactical

The main advantage of trading using opposite Value Fund and Sierra Tactical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund 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 Value Fund Investor 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.