Correlation Between Jensen Portfolio and Royce Premier

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

By analyzing existing cross correlation between The Jensen Portfolio and Royce Premier Fund, you can compare the effects of market volatilities on Jensen Portfolio and Royce Premier 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 Jensen Portfolio with a short position of Royce Premier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jensen Portfolio and Royce Premier.

Diversification Opportunities for Jensen Portfolio and Royce Premier

0.74

Correlation Coefficient

Jensen Portfolio  Royce Premier

Poor diversification

The 3 months correlation between Jensen and Royce is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding The Jensen Portfolio and Royce Premier Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Premier and Jensen 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 The Jensen Portfolio are associated (or correlated) with Royce Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Premier has no effect on the direction of Jensen Portfolio i.e., Jensen Portfolio and Royce Premier go up and down completely randomly.

Pair Corralation between Jensen Portfolio and Royce Premier

Assuming the 90 days horizon The Jensen Portfolio is expected to generate 0.26 times more return on investment than Royce Premier. However, The Jensen Portfolio is 3.8 times less risky than Royce Premier. It trades about 0.01 of its potential returns per unit of risk. Royce Premier Fund is currently generating about -0.19 per unit of risk. If you would invest  6,035  in The Jensen Portfolio on September 13, 2024 and sell it today you would earn a total of  2.00  from holding The Jensen Portfolio or generate 0.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

The Jensen Portfolio  vs.  Royce Premier Fund

Jensen Portfolio

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Jensen Portfolio are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Jensen Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Royce Premier

Risk-Adjusted Performance

0 of 100

OK

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

Pair Trading with Jensen Portfolio and Royce Premier

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

The idea behind The Jensen Portfolio and Royce Premier Fund 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.