Correlation Between Victory Diversified and Target Retirement

Can any of the company-specific risk be diversified away by investing in both Victory Diversified and Target Retirement 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 Target Retirement 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 Target Retirement 2040, you can compare the effects of market volatilities on Victory Diversified and Target Retirement 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 Target Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Victory Diversified and Target Retirement.

Diversification Opportunities for Victory Diversified and Target Retirement

0.71

Correlation Coefficient

Victory Diversified  Target Retirement

Poor diversification

The 3 months correlation between Victory and Target is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Victory Diversified Stock and Target Retirement 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Retirement 2040 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 Target Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Retirement 2040 has no effect on the direction of Victory Diversified i.e., Victory Diversified and Target Retirement go up and down completely randomly.

Pair Corralation between Victory Diversified and Target Retirement

Assuming the 90 days horizon Victory Diversified Stock is expected to under-perform the Target Retirement. In addition to that, Victory Diversified is 1.94 times more volatile than Target Retirement 2040. It trades about -0.25 of its total potential returns per unit of risk. Target Retirement 2040 is currently generating about -0.01 per unit of volatility. If you would invest  1,322  in Target Retirement 2040 on December 5, 2024 and sell it today you would lose (1.00) from holding Target Retirement 2040 or give up 0.08% of portfolio value over 90 days.

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

Victory Diversified Stock  vs.  Target Retirement 2040

Victory Diversified Stock

Risk-Adjusted Performance

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 weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Target Retirement 2040

Risk-Adjusted Performance

Very Weak

Over the last 90 days Target Retirement 2040 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Target Retirement 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 Target Retirement

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

The idea behind Victory Diversified Stock and Target Retirement 2040 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.