Correlation Between Cref Money and Plumb Balanced

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

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

Diversification Opportunities for Cref Money and Plumb Balanced

0.91

Correlation Coefficient

Cref Money  Plumb Balanced

Almost no diversification

The 3 months correlation between Cref and Plumb is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Cref Money Market and Plumb Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plumb Balanced and Cref Money 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 Cref Money Market 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 Cref Money i.e., Cref Money and Plumb Balanced go up and down completely randomly.

Pair Corralation between Cref Money and Plumb Balanced

Assuming the 90 days trading horizon Cref Money is expected to generate 4.24 times less return on investment than Plumb Balanced. But when comparing it to its historical volatility, Cref Money Market is 31.98 times less risky than Plumb Balanced. It trades about 0.96 of its potential returns per unit of risk. Plumb Balanced is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,898  in Plumb Balanced on September 15, 2024 and sell it today you would earn a total of  184.00  from holding Plumb Balanced or generate 4.72% return on investment over 90 days.

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

Cref Money Market  vs.  Plumb Balanced

Cref Money Market

Risk-Adjusted Performance

75 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Cref Money Market are ranked lower than 75 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Cref Money is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Cref Money and Plumb Balanced

The main advantage of trading using opposite Cref Money and Plumb Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cref Money 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 Cref Money Market 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.