Correlation Between Hedge Top and Hedge Real

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

By analyzing existing cross correlation between Hedge Top Fofii and Hedge Real Estate, you can compare the effects of market volatilities on Hedge Top and Hedge Real 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 Hedge Top with a short position of Hedge Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hedge Top and Hedge Real.

Diversification Opportunities for Hedge Top and Hedge Real

0.06

Correlation Coefficient

Hedge Top  Hedge Real

Significant diversification

The 3 months correlation between Hedge and Hedge is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Hedge Top Fofii and Hedge Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hedge Real Estate and Hedge Top 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 Hedge Top Fofii are associated (or correlated) with Hedge Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hedge Real Estate has no effect on the direction of Hedge Top i.e., Hedge Top and Hedge Real go up and down completely randomly.

Pair Corralation between Hedge Top and Hedge Real

Assuming the 90 days trading horizon Hedge Top Fofii is expected to under-perform the Hedge Real. But the fund apears to be less risky and, when comparing its historical volatility, Hedge Top Fofii is 1.26 times less risky than Hedge Real. The fund trades about -0.36 of its potential returns per unit of risk. The Hedge Real Estate is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  8,791  in Hedge Real Estate on September 12, 2024 and sell it today you would lose (237.00) from holding Hedge Real Estate or give up 2.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Hedge Top Fofii  vs.  Hedge Real Estate

Hedge Top Fofii

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hedge Top Fofii has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's basic indicators remain somewhat 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.

Hedge Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hedge Real Estate has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong fundamental indicators, Hedge Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hedge Top and Hedge Real

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

The idea behind Hedge Top Fofii and Hedge Real Estate 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.