Correlation Between Real Return and Perkins Mid

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

By analyzing existing cross correlation between Real Return Fund and Perkins Mid Cap, you can compare the effects of market volatilities on Real Return and Perkins Mid 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 Real Return with a short position of Perkins Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Return and Perkins Mid.

Diversification Opportunities for Real Return and Perkins Mid

-0.29

Correlation Coefficient

Real Return  Perkins Mid

Very good diversification

The 3 months correlation between Real and Perkins is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Real Return Fund and Perkins Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perkins Mid Cap and Real Return 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 Real Return Fund are associated (or correlated) with Perkins Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perkins Mid Cap has no effect on the direction of Real Return i.e., Real Return and Perkins Mid go up and down completely randomly.

Pair Corralation between Real Return and Perkins Mid

Assuming the 90 days horizon Real Return Fund is expected to generate 0.2 times more return on investment than Perkins Mid. However, Real Return Fund is 5.08 times less risky than Perkins Mid. It trades about -0.13 of its potential returns per unit of risk. Perkins Mid Cap is currently generating about -0.05 per unit of risk. If you would invest  1,031  in Real Return Fund on September 15, 2024 and sell it today you would lose (23.00) from holding Real Return Fund or give up 2.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Real Return Fund  vs.  Perkins Mid Cap

Real Return Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Perkins Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Real Return and Perkins Mid

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

The idea behind Real Return Fund and Perkins Mid Cap 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.