Correlation Between Balanced Fund and One Choice

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

By analyzing existing cross correlation between Balanced Fund Investor and One Choice 2030, you can compare the effects of market volatilities on Balanced Fund and One Choice 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 Fund with a short position of One Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and One Choice.

Diversification Opportunities for Balanced Fund and One Choice

0.92

Correlation Coefficient

Balanced Fund  One Choice

Almost no diversification

The 3 months correlation between Balanced and One is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Investor and One Choice 2030 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Choice 2030 and Balanced 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 Balanced Fund Investor are associated (or correlated) with One Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Choice 2030 has no effect on the direction of Balanced Fund i.e., Balanced Fund and One Choice go up and down completely randomly.

Pair Corralation between Balanced Fund and One Choice

Assuming the 90 days horizon Balanced Fund Investor is expected to generate 1.33 times more return on investment than One Choice. However, Balanced Fund is 1.33 times more volatile than One Choice 2030. It trades about 0.17 of its potential returns per unit of risk. One Choice 2030 is currently generating about 0.14 per unit of risk. If you would invest  1,951  in Balanced Fund Investor on September 10, 2024 and sell it today you would earn a total of  94.00  from holding Balanced Fund Investor or generate 4.82% return on investment over 90 days.

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

Balanced Fund Investor  vs.  One Choice 2030

Balanced Fund Investor

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Investor are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Balanced Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

One Choice 2030

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in One Choice 2030 are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, One Choice is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Balanced Fund and One Choice

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

The idea behind Balanced Fund Investor and One Choice 2030 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.