Correlation Between Sextant International and Sextant Growth

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

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

Diversification Opportunities for Sextant International and Sextant Growth

-0.2

Correlation Coefficient

Sextant International  Sextant Growth

Good diversification

The 3 months correlation between Sextant and Sextant is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sextant International Fund and Sextant Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sextant Growth and Sextant International 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 Sextant International Fund are associated (or correlated) with Sextant Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sextant Growth has no effect on the direction of Sextant International i.e., Sextant International and Sextant Growth go up and down completely randomly.

Pair Corralation between Sextant International and Sextant Growth

Assuming the 90 days horizon Sextant International is expected to generate 7.61 times less return on investment than Sextant Growth. But when comparing it to its historical volatility, Sextant International Fund is 1.04 times less risky than Sextant Growth. It trades about 0.03 of its potential returns per unit of risk. Sextant Growth Fund is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5,297  in Sextant Growth Fund on September 11, 2024 and sell it today you would earn a total of  526.00  from holding Sextant Growth Fund or generate 9.93% return on investment over 90 days.

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

Sextant International Fund  vs.  Sextant Growth Fund

Sextant International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sextant International Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Sextant International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sextant Growth

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sextant Growth Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Sextant Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sextant International and Sextant Growth

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

The idea behind Sextant International Fund and Sextant Growth Fund 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.