Correlation Between Victory Diversified and Elfun Diversified

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

By analyzing existing cross correlation between Victory Diversified Stock and Elfun Diversified Fund, you can compare the effects of market volatilities on Victory Diversified and Elfun Diversified 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 Victory Diversified with a short position of Elfun Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Victory Diversified and Elfun Diversified.

Diversification Opportunities for Victory Diversified and Elfun Diversified

0.8

Correlation Coefficient

Victory Diversified  Elfun Diversified

Very poor diversification

The 3 months correlation between Victory and Elfun is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Victory Diversified Stock and Elfun Diversified Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elfun Diversified and Victory Diversified 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 Victory Diversified Stock are associated (or correlated) with Elfun Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elfun Diversified has no effect on the direction of Victory Diversified i.e., Victory Diversified and Elfun Diversified go up and down completely randomly.

Pair Corralation between Victory Diversified and Elfun Diversified

Assuming the 90 days horizon Victory Diversified Stock is expected to generate 0.83 times more return on investment than Elfun Diversified. However, Victory Diversified Stock is 1.21 times less risky than Elfun Diversified. It trades about 0.1 of its potential returns per unit of risk. Elfun Diversified Fund is currently generating about -0.1 per unit of risk. If you would invest  1,868  in Victory Diversified Stock on October 26, 2024 and sell it today you would earn a total of  31.00  from holding Victory Diversified Stock or generate 1.66% return on investment over 90 days.

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

Victory Diversified Stock  vs.  Elfun Diversified Fund

Victory Diversified Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Victory Diversified Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Victory Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Elfun Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elfun Diversified Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Elfun Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Victory Diversified and Elfun Diversified

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

The idea behind Victory Diversified Stock and Elfun Diversified Fund 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.