Correlation Between Pear Tree and Aristotle Funds

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

By analyzing existing cross correlation between Pear Tree Polaris and Aristotle Funds Series, you can compare the effects of market volatilities on Pear Tree and Aristotle Funds 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 Pear Tree with a short position of Aristotle Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pear Tree and Aristotle Funds.

Diversification Opportunities for Pear Tree and Aristotle Funds

0.73

Correlation Coefficient

Pear Tree  Aristotle Funds

Poor diversification

The 3 months correlation between Pear and Aristotle is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Pear Tree Polaris and Aristotle Funds Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristotle Funds Series and Pear Tree 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 Pear Tree Polaris are associated (or correlated) with Aristotle Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristotle Funds Series has no effect on the direction of Pear Tree i.e., Pear Tree and Aristotle Funds go up and down completely randomly.

Pair Corralation between Pear Tree and Aristotle Funds

Assuming the 90 days horizon Pear Tree Polaris is expected to under-perform the Aristotle Funds. In addition to that, Pear Tree is 16.1 times more volatile than Aristotle Funds Series. It trades about -0.02 of its total potential returns per unit of risk. Aristotle Funds Series is currently generating about 0.14 per unit of volatility. If you would invest  1,004  in Aristotle Funds Series on September 19, 2024 and sell it today you would earn a total of  7.00  from holding Aristotle Funds Series or generate 0.7% return on investment over 90 days.

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

Pear Tree Polaris  vs.  Aristotle Funds Series

Pear Tree Polaris

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aristotle Funds Series

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Pear Tree and Aristotle Funds

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

The idea behind Pear Tree Polaris and Aristotle Funds Series 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.