Correlation Between Quantified Alternative and Kensington Managed

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

By analyzing existing cross correlation between Quantified Alternative Investment and Kensington Managed Income, you can compare the effects of market volatilities on Quantified Alternative and Kensington Managed 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 Quantified Alternative with a short position of Kensington Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quantified Alternative and Kensington Managed.

Diversification Opportunities for Quantified Alternative and Kensington Managed

0.8

Correlation Coefficient

Quantified Alternative  Kensington Managed

Very poor diversification

The 3 months correlation between Quantified and Kensington is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Quantified Alternative Investm and Kensington Managed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Managed Income and Quantified Alternative 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 Quantified Alternative Investment are associated (or correlated) with Kensington Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Managed Income has no effect on the direction of Quantified Alternative i.e., Quantified Alternative and Kensington Managed go up and down completely randomly.

Pair Corralation between Quantified Alternative and Kensington Managed

Assuming the 90 days horizon Quantified Alternative Investment is expected to generate 2.67 times more return on investment than Kensington Managed. However, Quantified Alternative is 2.67 times more volatile than Kensington Managed Income. It trades about 0.09 of its potential returns per unit of risk. Kensington Managed Income is currently generating about 0.16 per unit of risk. If you would invest  929.00  in Quantified Alternative Investment on September 3, 2024 and sell it today you would earn a total of  23.00  from holding Quantified Alternative Investment or generate 2.48% return on investment over 90 days.

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

Quantified Alternative Investm  vs.  Kensington Managed Income

Quantified Alternative

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quantified Alternative Investment are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Quantified Alternative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kensington Managed Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kensington Managed Income are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Kensington Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Quantified Alternative and Kensington Managed

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

The idea behind Quantified Alternative Investment and Kensington Managed Income 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.