Correlation Between Leisure Fund and Retailing Portfolio

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

By analyzing existing cross correlation between Leisure Fund Investor and Retailing Portfolio Retailing, you can compare the effects of market volatilities on Leisure Fund and Retailing Portfolio 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 Leisure Fund with a short position of Retailing Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leisure Fund and Retailing Portfolio.

Diversification Opportunities for Leisure Fund and Retailing Portfolio

0.9

Correlation Coefficient

Leisure Fund  Retailing Portfolio

Almost no diversification

The 3 months correlation between Leisure and Retailing is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Leisure Fund Investor and Retailing Portfolio Retailing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retailing Portfolio and Leisure Fund 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 Leisure Fund Investor are associated (or correlated) with Retailing Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retailing Portfolio has no effect on the direction of Leisure Fund i.e., Leisure Fund and Retailing Portfolio go up and down completely randomly.

Pair Corralation between Leisure Fund and Retailing Portfolio

Assuming the 90 days horizon Leisure Fund Investor is expected to generate 0.85 times more return on investment than Retailing Portfolio. However, Leisure Fund Investor is 1.18 times less risky than Retailing Portfolio. It trades about 0.37 of its potential returns per unit of risk. Retailing Portfolio Retailing is currently generating about 0.22 per unit of risk. If you would invest  8,266  in Leisure Fund Investor on August 31, 2024 and sell it today you would earn a total of  1,451  from holding Leisure Fund Investor or generate 17.55% return on investment over 90 days.

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

Leisure Fund Investor  vs.  Retailing Portfolio Retailing

Leisure Fund Investor

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Leisure Fund Investor are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Leisure Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Retailing Portfolio

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Retailing Portfolio Retailing are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Retailing Portfolio may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Leisure Fund and Retailing Portfolio

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

The idea behind Leisure Fund Investor and Retailing Portfolio Retailing 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.