Correlation Between Quantified Market and Kensington Managed

Can any of the company-specific risk be diversified away by investing in both Quantified Market 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 Market 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 Market Leaders and Kensington Managed Income, you can compare the effects of market volatilities on Quantified Market 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 Market with a short position of Kensington Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quantified Market and Kensington Managed.

Diversification Opportunities for Quantified Market and Kensington Managed

0.66

Correlation Coefficient

Quantified Market  Kensington Managed

Poor diversification

The 3 months correlation between Quantified and Kensington is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Quantified Market Leaders 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 Market 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 Market Leaders 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 Market i.e., Quantified Market and Kensington Managed go up and down completely randomly.

Pair Corralation between Quantified Market and Kensington Managed

Assuming the 90 days horizon Quantified Market Leaders is expected to generate 6.29 times more return on investment than Kensington Managed. However, Quantified Market is 6.29 times more volatile than Kensington Managed Income. It trades about 0.08 of its potential returns per unit of risk. Kensington Managed Income is currently generating about 0.13 per unit of risk. If you would invest  960.00  in Quantified Market Leaders on September 2, 2024 and sell it today you would earn a total of  253.00  from holding Quantified Market Leaders or generate 26.35% return on investment over 90 days.

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

Quantified Market Leaders  vs.  Kensington Managed Income

Quantified Market Leaders

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Quantified Market Leaders are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Quantified Market showed solid returns over the last few months and may actually be approaching a breakup point.

Kensington Managed Income

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kensington Managed Income are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 Market and Kensington Managed

The main advantage of trading using opposite Quantified Market and Kensington Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantified Market 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 Market Leaders 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.