Correlation Between Fundamental Large and Pacific Funds

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

By analyzing existing cross correlation between Fundamental Large Cap and Pacific Funds Ultra, you can compare the effects of market volatilities on Fundamental Large and Pacific Funds 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 Fundamental Large with a short position of Pacific Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundamental Large and Pacific Funds.

Diversification Opportunities for Fundamental Large and Pacific Funds

0.8

Correlation Coefficient

Fundamental Large  Pacific Funds

Very poor diversification

The 3 months correlation between FUNDAMENTAL and Pacific is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and Pacific Funds Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Funds Ultra and Fundamental Large 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 Fundamental Large Cap are associated (or correlated) with Pacific Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Funds Ultra has no effect on the direction of Fundamental Large i.e., Fundamental Large and Pacific Funds go up and down completely randomly.

Pair Corralation between Fundamental Large and Pacific Funds

Assuming the 90 days horizon Fundamental Large Cap is expected to generate 8.25 times more return on investment than Pacific Funds. However, Fundamental Large is 8.25 times more volatile than Pacific Funds Ultra. It trades about 0.2 of its potential returns per unit of risk. Pacific Funds Ultra is currently generating about 0.17 per unit of risk. If you would invest  7,578  in Fundamental Large Cap on September 4, 2024 and sell it today you would earn a total of  708.00  from holding Fundamental Large Cap or generate 9.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Fundamental Large Cap  vs.  Pacific Funds Ultra

Fundamental Large Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fundamental Large Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fundamental Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pacific Funds Ultra

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Funds Ultra are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Pacific Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fundamental Large and Pacific Funds

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

The idea behind Fundamental Large Cap and Pacific Funds Ultra 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.