Correlation Between Short Duration and Weitz Balanced

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

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

Diversification Opportunities for Short Duration and Weitz Balanced

-0.27

Correlation Coefficient

Short Duration  Weitz Balanced

Very good diversification

The 3 months correlation between Short and Weitz is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Short Duration Income and Weitz Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weitz Balanced and Short Duration 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 Short Duration Income are associated (or correlated) with Weitz Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weitz Balanced has no effect on the direction of Short Duration i.e., Short Duration and Weitz Balanced go up and down completely randomly.

Pair Corralation between Short Duration and Weitz Balanced

Assuming the 90 days horizon Short Duration Income is expected to generate 0.22 times more return on investment than Weitz Balanced. However, Short Duration Income is 4.49 times less risky than Weitz Balanced. It trades about 0.16 of its potential returns per unit of risk. Weitz Balanced is currently generating about -0.15 per unit of risk. If you would invest  1,187  in Short Duration Income on December 1, 2024 and sell it today you would earn a total of  12.00  from holding Short Duration Income or generate 1.01% return on investment over 90 days.

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

Short Duration Income  vs.  Weitz Balanced

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 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Short Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Short Duration and Weitz Balanced

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

The idea behind Short Duration Income and Weitz 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.