Correlation Between Us Small and Sentinel Multi-asset

Can any of the company-specific risk be diversified away by investing in both Us Small and Sentinel Multi-asset 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 Us Small and Sentinel Multi-asset into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Us Small Cap and Sentinel Multi Asset Income, you can compare the effects of market volatilities on Us Small and Sentinel Multi-asset 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 Us Small with a short position of Sentinel Multi-asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Small and Sentinel Multi-asset.

Diversification Opportunities for Us Small and Sentinel Multi-asset

0.99

Correlation Coefficient

Us Small  Sentinel Multi-asset

No risk reduction

The 3 months correlation between DFSTX and Sentinel is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Us Small Cap and Sentinel Multi Asset Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentinel Multi Asset and Us Small 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 Us Small Cap are associated (or correlated) with Sentinel Multi-asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentinel Multi Asset has no effect on the direction of Us Small i.e., Us Small and Sentinel Multi-asset go up and down completely randomly.

Pair Corralation between Us Small and Sentinel Multi-asset

Assuming the 90 days horizon Us Small Cap is expected to generate 1.04 times more return on investment than Sentinel Multi-asset. However, Us Small is 1.04 times more volatile than Sentinel Multi Asset Income. It trades about 0.17 of its potential returns per unit of risk. Sentinel Multi Asset Income is currently generating about 0.17 per unit of risk. If you would invest  4,695  in Us Small Cap on September 2, 2024 and sell it today you would earn a total of  620.00  from holding Us Small Cap or generate 13.21% return on investment over 90 days.

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

Us Small Cap  vs.  Sentinel Multi Asset Income

Us Small Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Us Small Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Us Small showed solid returns over the last few months and may actually be approaching a breakup point.

Sentinel Multi Asset

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sentinel Multi Asset Income are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Sentinel Multi-asset may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Us Small and Sentinel Multi-asset

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

The idea behind Us Small Cap and Sentinel Multi Asset Income 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..