Correlation Between Fundamental Indexplus and Stocksplus Total

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

By analyzing existing cross correlation between Fundamental Indexplus Tr and Stocksplus Total Return, you can compare the effects of market volatilities on Fundamental Indexplus and Stocksplus Total 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 Fundamental Indexplus with a short position of Stocksplus Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundamental Indexplus and Stocksplus Total.

Diversification Opportunities for Fundamental Indexplus and Stocksplus Total

0.79

Correlation Coefficient

Fundamental Indexplus  Stocksplus Total

Poor diversification

The 3 months correlation between Fundamental and Stocksplus is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Indexplus Tr and Stocksplus Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stocksplus Total Return and Fundamental Indexplus 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 Fundamental Indexplus Tr are associated (or correlated) with Stocksplus Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stocksplus Total Return has no effect on the direction of Fundamental Indexplus i.e., Fundamental Indexplus and Stocksplus Total go up and down completely randomly.

Pair Corralation between Fundamental Indexplus and Stocksplus Total

Assuming the 90 days horizon Fundamental Indexplus Tr is expected to under-perform the Stocksplus Total. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fundamental Indexplus Tr is 1.16 times less risky than Stocksplus Total. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Stocksplus Total Return is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,254  in Stocksplus Total Return on September 26, 2024 and sell it today you would lose (4.00) from holding Stocksplus Total Return or give up 0.32% of portfolio value over 90 days.

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

Fundamental Indexplus Tr  vs.  Stocksplus Total Return

Fundamental Indexplus

Risk-Adjusted Performance

0 of 100

Very Weak

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

Stocksplus Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fundamental Indexplus and Stocksplus Total

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

The idea behind Fundamental Indexplus Tr and Stocksplus Total Return 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.