Correlation Between Largecap and Hussman Strategic

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

By analyzing existing cross correlation between Largecap Sp 500 and Hussman Strategic Total, you can compare the effects of market volatilities on Largecap and Hussman Strategic 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 Largecap with a short position of Hussman Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Largecap and Hussman Strategic.

Diversification Opportunities for Largecap and Hussman Strategic

-0.35

Correlation Coefficient

Largecap  Hussman Strategic

Very good diversification

The 3 months correlation between Largecap and Hussman is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Largecap Sp 500 and Hussman Strategic Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hussman Strategic Total and Largecap 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 Largecap Sp 500 are associated (or correlated) with Hussman Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hussman Strategic Total has no effect on the direction of Largecap i.e., Largecap and Hussman Strategic go up and down completely randomly.

Pair Corralation between Largecap and Hussman Strategic

Assuming the 90 days horizon Largecap Sp 500 is expected to generate 2.29 times more return on investment than Hussman Strategic. However, Largecap is 2.29 times more volatile than Hussman Strategic Total. It trades about 0.1 of its potential returns per unit of risk. Hussman Strategic Total is currently generating about 0.1 per unit of risk. If you would invest  2,690  in Largecap Sp 500 on September 15, 2024 and sell it today you would earn a total of  301.00  from holding Largecap Sp 500 or generate 11.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Largecap Sp 500  vs.  Hussman Strategic Total

Largecap Sp 500

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Largecap Sp 500 are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Largecap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hussman Strategic Total

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Largecap and Hussman Strategic

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

The idea behind Largecap Sp 500 and Hussman Strategic Total 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.