Correlation Between Performance Trust and Plumb Balanced

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

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

Diversification Opportunities for Performance Trust and Plumb Balanced

-0.44

Correlation Coefficient

Performance Trust  Plumb Balanced

Very good diversification

The 3 months correlation between Performance and Plumb is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Performance Trust Strategic and Plumb Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plumb Balanced and Performance Trust 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 Performance Trust Strategic are associated (or correlated) with Plumb Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plumb Balanced has no effect on the direction of Performance Trust i.e., Performance Trust and Plumb Balanced go up and down completely randomly.

Pair Corralation between Performance Trust and Plumb Balanced

Assuming the 90 days horizon Performance Trust Strategic is expected to under-perform the Plumb Balanced. But the mutual fund apears to be less risky and, when comparing its historical volatility, Performance Trust Strategic is 1.9 times less risky than Plumb Balanced. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Plumb Balanced is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,887  in Plumb Balanced on September 15, 2024 and sell it today you would earn a total of  219.00  from holding Plumb Balanced or generate 5.63% return on investment over 90 days.

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

Performance Trust Strategic  vs.  Plumb Balanced

Performance Trust

Risk-Adjusted Performance

0 of 100

Very Weak

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

Plumb Balanced

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plumb Balanced are ranked lower than 11 (%) 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.

Pair Trading with Performance Trust and Plumb Balanced

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

The idea behind Performance Trust Strategic and Plumb Balanced 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.