Correlation Between Pro Blend and 1290 Smartbeta

Can any of the company-specific risk be diversified away by investing in both Pro Blend and 1290 Smartbeta 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 Pro Blend and 1290 Smartbeta into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pro Blend Moderate Term and 1290 Smartbeta Equity, you can compare the effects of market volatilities on Pro Blend and 1290 Smartbeta 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 Pro Blend with a short position of 1290 Smartbeta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pro Blend and 1290 Smartbeta.

Diversification Opportunities for Pro Blend and 1290 Smartbeta

-0.26

Correlation Coefficient

Pro Blend  1290 Smartbeta

Very good diversification

The 3 months correlation between Pro and 1290 is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Pro Blend Moderate Term and 1290 Smartbeta Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1290 Smartbeta Equity and Pro Blend 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 Pro Blend Moderate Term are associated (or correlated) with 1290 Smartbeta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1290 Smartbeta Equity has no effect on the direction of Pro Blend i.e., Pro Blend and 1290 Smartbeta go up and down completely randomly.

Pair Corralation between Pro Blend and 1290 Smartbeta

Assuming the 90 days horizon Pro Blend Moderate Term is expected to under-perform the 1290 Smartbeta. In addition to that, Pro Blend is 2.24 times more volatile than 1290 Smartbeta Equity. It trades about -0.11 of its total potential returns per unit of risk. 1290 Smartbeta Equity is currently generating about 0.08 per unit of volatility. If you would invest  1,945  in 1290 Smartbeta Equity on September 16, 2024 and sell it today you would earn a total of  30.00  from holding 1290 Smartbeta Equity or generate 1.54% return on investment over 90 days.

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

Pro Blend Moderate Term  vs.  1290 Smartbeta Equity

Pro Blend Moderate

Risk-Adjusted Performance

0 of 100

Very Weak

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

1290 Smartbeta Equity

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 1290 Smartbeta Equity are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, 1290 Smartbeta is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pro Blend and 1290 Smartbeta

The main advantage of trading using opposite Pro Blend and 1290 Smartbeta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pro Blend position performs unexpectedly, 1290 Smartbeta 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 1290 Smartbeta will offset losses from the drop in 1290 Smartbeta's long position.

The idea behind Pro Blend Moderate Term and 1290 Smartbeta Equity 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.