Correlation Between Pro Blend and Disciplined Value

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

By analyzing existing cross correlation between Pro Blend Servative Term and Disciplined Value Series, you can compare the effects of market volatilities on Pro Blend and Disciplined Value 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 Pro Blend with a short position of Disciplined Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pro Blend and Disciplined Value.

Diversification Opportunities for Pro Blend and Disciplined Value

-0.36

Correlation Coefficient

Pro Blend  Disciplined Value

Very good diversification

The 3 months correlation between Pro and Disciplined is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Pro Blend Servative Term and Disciplined Value Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Disciplined Value Series and Pro Blend 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 Pro Blend Servative Term are associated (or correlated) with Disciplined Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Disciplined Value Series has no effect on the direction of Pro Blend i.e., Pro Blend and Disciplined Value go up and down completely randomly.

Pair Corralation between Pro Blend and Disciplined Value

Assuming the 90 days horizon Pro Blend Servative Term is expected to under-perform the Disciplined Value. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pro Blend Servative Term is 3.17 times less risky than Disciplined Value. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Disciplined Value Series is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  868.00  in Disciplined Value Series on September 12, 2024 and sell it today you would earn a total of  52.00  from holding Disciplined Value Series or generate 5.99% return on investment over 90 days.

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

Pro Blend Servative Term  vs.  Disciplined Value Series

Pro Blend Servative

Risk-Adjusted Performance

0 of 100

Very Weak

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

Disciplined Value Series

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Disciplined Value Series are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Disciplined Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pro Blend and Disciplined Value

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

The idea behind Pro Blend Servative Term and Disciplined Value Series 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.