Correlation Between Balanced Strategy and Copeland Risk

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

By analyzing existing cross correlation between Balanced Strategy Fund and Copeland Risk Managed, you can compare the effects of market volatilities on Balanced Strategy and Copeland Risk 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 Balanced Strategy with a short position of Copeland Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Strategy and Copeland Risk.

Diversification Opportunities for Balanced Strategy and Copeland Risk

0.07

Correlation Coefficient

Balanced Strategy  Copeland Risk

Significant diversification

The 3 months correlation between Balanced and Copeland is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy Fund and Copeland Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copeland Risk Managed and Balanced Strategy 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 Balanced Strategy Fund are associated (or correlated) with Copeland Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copeland Risk Managed has no effect on the direction of Balanced Strategy i.e., Balanced Strategy and Copeland Risk go up and down completely randomly.

Pair Corralation between Balanced Strategy and Copeland Risk

Assuming the 90 days horizon Balanced Strategy Fund is expected to generate 0.23 times more return on investment than Copeland Risk. However, Balanced Strategy Fund is 4.32 times less risky than Copeland Risk. It trades about 0.04 of its potential returns per unit of risk. Copeland Risk Managed is currently generating about -0.08 per unit of risk. If you would invest  1,111  in Balanced Strategy Fund on September 16, 2024 and sell it today you would earn a total of  12.00  from holding Balanced Strategy Fund or generate 1.08% return on investment over 90 days.

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

Balanced Strategy Fund  vs.  Copeland Risk Managed

Balanced Strategy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Strategy Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Balanced Strategy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Copeland Risk Managed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Copeland Risk Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Balanced Strategy and Copeland Risk

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

The idea behind Balanced Strategy Fund and Copeland Risk Managed 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.