Correlation Between The National and Catalystmillburn

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

By analyzing existing cross correlation between The National Tax Free and Catalystmillburn Hedge Strategy, you can compare the effects of market volatilities on The National and Catalystmillburn 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 The National with a short position of Catalystmillburn. Check out your portfolio center. Please also check ongoing floating volatility patterns of The National and Catalystmillburn.

Diversification Opportunities for The National and Catalystmillburn

-0.59

Correlation Coefficient

The National  Catalystmillburn

Excellent diversification

The 3 months correlation between The and Catalystmillburn is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free and Catalystmillburn Hedge Strateg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystmillburn Hedge and The National 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 The National Tax Free are associated (or correlated) with Catalystmillburn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystmillburn Hedge has no effect on the direction of The National i.e., The National and Catalystmillburn go up and down completely randomly.

Pair Corralation between The National and Catalystmillburn

Assuming the 90 days horizon The National is expected to generate 13.3 times less return on investment than Catalystmillburn. But when comparing it to its historical volatility, The National Tax Free is 2.31 times less risky than Catalystmillburn. It trades about 0.04 of its potential returns per unit of risk. Catalystmillburn Hedge Strategy is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,748  in Catalystmillburn Hedge Strategy on September 2, 2024 and sell it today you would earn a total of  251.00  from holding Catalystmillburn Hedge Strategy or generate 6.7% return on investment over 90 days.

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

The National Tax Free  vs.  Catalystmillburn Hedge Strateg

National Tax

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The National Tax Free are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, The National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Catalystmillburn Hedge

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalystmillburn Hedge Strategy are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Catalystmillburn may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with The National and Catalystmillburn

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

The idea behind The National Tax Free and Catalystmillburn Hedge Strategy 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.