Correlation Between Value Fund and Strategic Allocation

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

Diversification Opportunities for Value Fund and Strategic Allocation

0.89

Correlation Coefficient

Value Fund  Strategic Allocation

Very poor diversification

The 3 months correlation between Value and Strategic is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Investor and Strategic Allocation Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Allocation 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 Strategic Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Allocation has no effect on the direction of Value Fund i.e., Value Fund and Strategic Allocation go up and down completely randomly.

Pair Corralation between Value Fund and Strategic Allocation

Assuming the 90 days horizon Value Fund Investor is expected to generate 1.42 times more return on investment than Strategic Allocation. However, Value Fund is 1.42 times more volatile than Strategic Allocation Moderate. It trades about 0.13 of its potential returns per unit of risk. Strategic Allocation Moderate is currently generating about 0.17 per unit of risk. If you would invest  850.00  in Value Fund Investor on August 31, 2024 and sell it today you would earn a total of  41.00  from holding Value Fund Investor or generate 4.82% return on investment over 90 days.

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

Value Fund Investor  vs.  Strategic Allocation Moderate

Value Fund Investor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund Investor are ranked lower than 9 (%) 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.

Strategic Allocation

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Allocation Moderate are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Strategic Allocation 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 Strategic Allocation

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

The idea behind Value Fund Investor and Strategic Allocation Moderate 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.