Correlation Between Plumb Balanced and Wesmark Tactical

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

By analyzing existing cross correlation between Plumb Balanced and Wesmark Tactical Opportunity, you can compare the effects of market volatilities on Plumb Balanced and Wesmark Tactical 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 Plumb Balanced with a short position of Wesmark Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plumb Balanced and Wesmark Tactical.

Diversification Opportunities for Plumb Balanced and Wesmark Tactical

0.72

Correlation Coefficient

Plumb Balanced  Wesmark Tactical

Poor diversification

The 3 months correlation between Plumb and Wesmark is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Plumb Balanced and Wesmark Tactical Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesmark Tactical Opp and Plumb Balanced 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 Plumb Balanced are associated (or correlated) with Wesmark Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesmark Tactical Opp has no effect on the direction of Plumb Balanced i.e., Plumb Balanced and Wesmark Tactical go up and down completely randomly.

Pair Corralation between Plumb Balanced and Wesmark Tactical

Assuming the 90 days horizon Plumb Balanced is expected to generate 1.63 times more return on investment than Wesmark Tactical. However, Plumb Balanced is 1.63 times more volatile than Wesmark Tactical Opportunity. It trades about 0.12 of its potential returns per unit of risk. Wesmark Tactical Opportunity is currently generating about 0.13 per unit of risk. If you would invest  3,284  in Plumb Balanced on September 14, 2024 and sell it today you would earn a total of  798.00  from holding Plumb Balanced or generate 24.3% return on investment over 90 days.

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

Plumb Balanced  vs.  Wesmark Tactical Opportunity

Plumb Balanced

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plumb Balanced are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Plumb Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wesmark Tactical Opp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wesmark Tactical Opportunity are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Wesmark Tactical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Plumb Balanced and Wesmark Tactical

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

The idea behind Plumb Balanced and Wesmark Tactical Opportunity 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..