Correlation Between Aristotle Value and Wilmington Intermediate

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

By analyzing existing cross correlation between Aristotle Value Eq and Wilmington Intermediate Term Bond, you can compare the effects of market volatilities on Aristotle Value and Wilmington Intermediate 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 Aristotle Value with a short position of Wilmington Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristotle Value and Wilmington Intermediate.

Diversification Opportunities for Aristotle Value and Wilmington Intermediate

-0.17

Correlation Coefficient

Aristotle Value  Wilmington Intermediate

Good diversification

The 3 months correlation between Aristotle and Wilmington is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Aristotle Value Eq and Wilmington Intermediate Term B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington Intermediate and Aristotle Value 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 Aristotle Value Eq are associated (or correlated) with Wilmington Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmington Intermediate has no effect on the direction of Aristotle Value i.e., Aristotle Value and Wilmington Intermediate go up and down completely randomly.

Pair Corralation between Aristotle Value and Wilmington Intermediate

Assuming the 90 days horizon Aristotle Value Eq is expected to under-perform the Wilmington Intermediate. But the mutual fund apears to be less risky and, when comparing its historical volatility, Aristotle Value Eq is 1.01 times less risky than Wilmington Intermediate. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Wilmington Intermediate Term Bond is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,186  in Wilmington Intermediate Term Bond on September 19, 2024 and sell it today you would lose (36.00) from holding Wilmington Intermediate Term Bond or give up 3.04% of portfolio value over 90 days.

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

Aristotle Value Eq  vs.  Wilmington Intermediate Term B

Aristotle Value Eq

Risk-Adjusted Performance

0 of 100

Very Weak

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

Wilmington Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aristotle Value and Wilmington Intermediate

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

The idea behind Aristotle Value Eq and Wilmington Intermediate Term Bond 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 Global Correlations module to find global opportunities by holding instruments from different markets.