Correlation Between Balanced Fund and Total Return

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

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

Diversification Opportunities for Balanced Fund and Total Return

0.79

Correlation Coefficient

Balanced Fund  Total Return

Poor diversification

The 3 months correlation between Balanced and Total is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Institutional and Total Return Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Return Bond and Balanced Fund 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 Balanced Fund Institutional are associated (or correlated) with Total Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Return Bond has no effect on the direction of Balanced Fund i.e., Balanced Fund and Total Return go up and down completely randomly.

Pair Corralation between Balanced Fund and Total Return

Assuming the 90 days horizon Balanced Fund Institutional is expected to generate 5.15 times more return on investment than Total Return. However, Balanced Fund is 5.15 times more volatile than Total Return Bond. It trades about 0.11 of its potential returns per unit of risk. Total Return Bond is currently generating about 0.17 per unit of risk. If you would invest  1,414  in Balanced Fund Institutional on September 2, 2024 and sell it today you would earn a total of  49.00  from holding Balanced Fund Institutional or generate 3.47% return on investment over 90 days.

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

Balanced Fund Institutional  vs.  Total Return Bond

Balanced Fund Instit

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Institutional are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Balanced Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Total Return Bond

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Total Return Bond are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Total Return is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Balanced Fund and Total Return

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

The idea behind Balanced Fund Institutional and Total Return 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.