Correlation Between Weitz Balanced and Short Duration

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

By analyzing existing cross correlation between Weitz Balanced and Short Duration Income, you can compare the effects of market volatilities on Weitz Balanced and Short Duration 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 Weitz Balanced with a short position of Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weitz Balanced and Short Duration.

Diversification Opportunities for Weitz Balanced and Short Duration

-0.14

Correlation Coefficient

Weitz Balanced  Short Duration

Good diversification

The 3 months correlation between Weitz and Short is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Weitz Balanced and Short Duration Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Income and Weitz Balanced 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 Weitz Balanced are associated (or correlated) with Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Income has no effect on the direction of Weitz Balanced i.e., Weitz Balanced and Short Duration go up and down completely randomly.

Pair Corralation between Weitz Balanced and Short Duration

Assuming the 90 days horizon Weitz Balanced is expected to generate 9.36 times less return on investment than Short Duration. In addition to that, Weitz Balanced is 2.97 times more volatile than Short Duration Income. It trades about 0.01 of its total potential returns per unit of risk. Short Duration Income is currently generating about 0.2 per unit of volatility. If you would invest  1,184  in Short Duration Income on December 29, 2024 and sell it today you would earn a total of  17.00  from holding Short Duration Income or generate 1.44% return on investment over 90 days.

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

Weitz Balanced  vs.  Short Duration Income

Weitz Balanced

Risk-Adjusted Performance

Very Weak

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

Short Duration Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Short Duration Income are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Short Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Weitz Balanced and Short Duration

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

The idea behind Weitz Balanced and Short Duration Income 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.