Correlation Between Sierra E and Sierra Tactical

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

By analyzing existing cross correlation between Sierra E Retirement and Sierra Tactical Risk, you can compare the effects of market volatilities on Sierra E and Sierra Tactical 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 Sierra E with a short position of Sierra Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra E and Sierra Tactical.

Diversification Opportunities for Sierra E and Sierra Tactical

0.93

Correlation Coefficient

Sierra E  Sierra Tactical

Almost no diversification

The 3 months correlation between Sierra and Sierra is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Sierra Tactical Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Tactical Risk and Sierra E 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 Sierra E Retirement are associated (or correlated) with Sierra Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Tactical Risk has no effect on the direction of Sierra E i.e., Sierra E and Sierra Tactical go up and down completely randomly.

Pair Corralation between Sierra E and Sierra Tactical

Assuming the 90 days horizon Sierra E is expected to generate 1.15 times less return on investment than Sierra Tactical. In addition to that, Sierra E is 1.1 times more volatile than Sierra Tactical Risk. It trades about 0.09 of its total potential returns per unit of risk. Sierra Tactical Risk is currently generating about 0.12 per unit of volatility. If you would invest  2,485  in Sierra Tactical Risk on September 14, 2024 and sell it today you would earn a total of  219.00  from holding Sierra Tactical Risk or generate 8.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.6%
Values	Daily Returns

Sierra E Retirement  vs.  Sierra Tactical Risk

Sierra E Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sierra Tactical Risk

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Sierra E and Sierra Tactical

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

The idea behind Sierra E Retirement and Sierra Tactical Risk 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.