Correlation Between Kensington Defender and Scharf Fund

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

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

Diversification Opportunities for Kensington Defender and Scharf Fund

0.67

Correlation Coefficient

Kensington Defender  Scharf Fund

Poor diversification

The 3 months correlation between Kensington and Scharf is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Kensington Defender Institutio and Scharf Fund Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scharf Fund Retail and Kensington Defender 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 Kensington Defender Institutional are associated (or correlated) with Scharf Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scharf Fund Retail has no effect on the direction of Kensington Defender i.e., Kensington Defender and Scharf Fund go up and down completely randomly.

Pair Corralation between Kensington Defender and Scharf Fund

Assuming the 90 days horizon Kensington Defender Institutional is expected to generate 0.65 times more return on investment than Scharf Fund. However, Kensington Defender Institutional is 1.54 times less risky than Scharf Fund. It trades about -0.05 of its potential returns per unit of risk. Scharf Fund Retail is currently generating about -0.13 per unit of risk. If you would invest  1,061  in Kensington Defender Institutional on September 22, 2024 and sell it today you would lose (20.00) from holding Kensington Defender Institutional or give up 1.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Kensington Defender Institutio  vs.  Scharf Fund Retail

Kensington Defender

Risk-Adjusted Performance

0 of 100

Very Weak

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

Scharf Fund Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scharf Fund Retail has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Kensington Defender and Scharf Fund

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

The idea behind Kensington Defender Institutional and Scharf Fund Retail 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.