Correlation Between Fabxx and Spectrum Advisors

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

By analyzing existing cross correlation between Fabxx and Spectrum Advisors Preferred, you can compare the effects of market volatilities on Fabxx and Spectrum Advisors 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 Fabxx with a short position of Spectrum Advisors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fabxx and Spectrum Advisors.

Diversification Opportunities for Fabxx and Spectrum Advisors

-0.39

Correlation Coefficient

Fabxx  Spectrum Advisors

Very good diversification

The 3 months correlation between Fabxx and Spectrum is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Fabxx and Spectrum Advisors Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Advisors and Fabxx 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 Fabxx are associated (or correlated) with Spectrum Advisors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Advisors has no effect on the direction of Fabxx i.e., Fabxx and Spectrum Advisors go up and down completely randomly.

Pair Corralation between Fabxx and Spectrum Advisors

Assuming the 90 days horizon Fabxx is expected to under-perform the Spectrum Advisors. In addition to that, Fabxx is 8.96 times more volatile than Spectrum Advisors Preferred. It trades about -0.16 of its total potential returns per unit of risk. Spectrum Advisors Preferred is currently generating about 0.09 per unit of volatility. If you would invest  1,776  in Spectrum Advisors Preferred on September 12, 2024 and sell it today you would earn a total of  82.00  from holding Spectrum Advisors Preferred or generate 4.62% return on investment over 90 days.

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

Fabxx  vs.  Spectrum Advisors Preferred

Fabxx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fabxx has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Spectrum Advisors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spectrum Advisors Preferred are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Spectrum Advisors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fabxx and Spectrum Advisors

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

The idea behind Fabxx and Spectrum Advisors Preferred 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.

Check out your portfolio center.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.