Correlation Between Core Plus and Balanced Fund

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

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

Diversification Opportunities for Core Plus and Balanced Fund

-0.35

Correlation Coefficient

Core Plus  Balanced Fund

Very good diversification

The 3 months correlation between Core and Balanced is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Core Plus Income and Balanced Fund Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Balanced and Core Plus 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 Core Plus Income are associated (or correlated) with Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Balanced has no effect on the direction of Core Plus i.e., Core Plus and Balanced Fund go up and down completely randomly.

Pair Corralation between Core Plus and Balanced Fund

Assuming the 90 days horizon Core Plus Income is expected to under-perform the Balanced Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Core Plus Income is 1.2 times less risky than Balanced Fund. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Balanced Fund Balanced is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,749  in Balanced Fund Balanced on September 1, 2024 and sell it today you would earn a total of  42.00  from holding Balanced Fund Balanced or generate 2.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Core Plus Income  vs.  Balanced Fund Balanced

Core Plus Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Balanced Fund Balanced

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Balanced are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Balanced Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Core Plus and Balanced Fund

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

The idea behind Core Plus Income and Balanced Fund Balanced 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.