Correlation Between Chemicals Portfolio and Strategic Advisers

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

By analyzing existing cross correlation between Chemicals Portfolio Chemicals and Strategic Advisers Small Mid, you can compare the effects of market volatilities on Chemicals Portfolio and Strategic Advisers 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 Chemicals Portfolio with a short position of Strategic Advisers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chemicals Portfolio and Strategic Advisers.

Diversification Opportunities for Chemicals Portfolio and Strategic Advisers

0.61

Correlation Coefficient

Chemicals Portfolio  Strategic Advisers

Poor diversification

The 3 months correlation between CHEMICALS and Strategic is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Chemicals Portfolio Chemicals and Strategic Advisers Small Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Advisers and Chemicals Portfolio 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 Chemicals Portfolio Chemicals are associated (or correlated) with Strategic Advisers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Advisers has no effect on the direction of Chemicals Portfolio i.e., Chemicals Portfolio and Strategic Advisers go up and down completely randomly.

Pair Corralation between Chemicals Portfolio and Strategic Advisers

Assuming the 90 days horizon Chemicals Portfolio is expected to generate 2.42 times less return on investment than Strategic Advisers. In addition to that, Chemicals Portfolio is 1.02 times more volatile than Strategic Advisers Small Mid. It trades about 0.06 of its total potential returns per unit of risk. Strategic Advisers Small Mid is currently generating about 0.14 per unit of volatility. If you would invest  1,759  in Strategic Advisers Small Mid on September 3, 2024 and sell it today you would earn a total of  139.00  from holding Strategic Advisers Small Mid or generate 7.9% return on investment over 90 days.

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

Chemicals Portfolio Chemicals  vs.  Strategic Advisers Small Mid

Chemicals Portfolio

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chemicals Portfolio Chemicals are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Chemicals Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Strategic Advisers

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Advisers Small Mid are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Strategic Advisers may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chemicals Portfolio and Strategic Advisers

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

The idea behind Chemicals Portfolio Chemicals and Strategic Advisers Small Mid 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.