Correlation Between Rational Dynamic and Catalystmillburn

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

By analyzing existing cross correlation between Rational Dynamic Momentum and Catalystmillburn Hedge Strategy, you can compare the effects of market volatilities on Rational Dynamic and Catalystmillburn 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 Rational Dynamic with a short position of Catalystmillburn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Dynamic and Catalystmillburn.

Diversification Opportunities for Rational Dynamic and Catalystmillburn

-0.34

Correlation Coefficient

Rational Dynamic  Catalystmillburn

Very good diversification

The 3 months correlation between Rational and Catalystmillburn is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Rational Dynamic Momentum and Catalystmillburn Hedge Strateg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystmillburn Hedge and Rational Dynamic 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 Rational Dynamic Momentum are associated (or correlated) with Catalystmillburn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystmillburn Hedge has no effect on the direction of Rational Dynamic i.e., Rational Dynamic and Catalystmillburn go up and down completely randomly.

Pair Corralation between Rational Dynamic and Catalystmillburn

Assuming the 90 days horizon Rational Dynamic is expected to generate 7.86 times less return on investment than Catalystmillburn. But when comparing it to its historical volatility, Rational Dynamic Momentum is 1.08 times less risky than Catalystmillburn. It trades about 0.01 of its potential returns per unit of risk. Catalystmillburn Hedge Strategy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,807  in Catalystmillburn Hedge Strategy on September 16, 2024 and sell it today you would earn a total of  122.00  from holding Catalystmillburn Hedge Strategy or generate 3.2% return on investment over 90 days.

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

Rational Dynamic Momentum  vs.  Catalystmillburn Hedge Strateg

Rational Dynamic Momentum

Risk-Adjusted Performance

0 of 100

Very Weak

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

Catalystmillburn Hedge

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Catalystmillburn Hedge Strategy are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Catalystmillburn is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rational Dynamic and Catalystmillburn

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

The idea behind Rational Dynamic Momentum and Catalystmillburn Hedge Strategy 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.