Correlation Between Strategic Allocation and Eventide Limited

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

By analyzing existing cross correlation between Strategic Allocation Moderate and Eventide Limited Term Bond, you can compare the effects of market volatilities on Strategic Allocation and Eventide Limited 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 Strategic Allocation with a short position of Eventide Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Allocation and Eventide Limited.

Diversification Opportunities for Strategic Allocation and Eventide Limited

0.11

Correlation Coefficient

Strategic Allocation  Eventide Limited

Average diversification

The 3 months correlation between Strategic and Eventide is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Moderate and Eventide Limited Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eventide Limited Term and Strategic Allocation 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 Strategic Allocation Moderate are associated (or correlated) with Eventide Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eventide Limited Term has no effect on the direction of Strategic Allocation i.e., Strategic Allocation and Eventide Limited go up and down completely randomly.

Pair Corralation between Strategic Allocation and Eventide Limited

Assuming the 90 days horizon Strategic Allocation Moderate is expected to under-perform the Eventide Limited. In addition to that, Strategic Allocation is 4.98 times more volatile than Eventide Limited Term Bond. It trades about -0.1 of its total potential returns per unit of risk. Eventide Limited Term Bond is currently generating about -0.16 per unit of volatility. If you would invest  1,037  in Eventide Limited Term Bond on September 23, 2024 and sell it today you would lose (14.00) from holding Eventide Limited Term Bond or give up 1.35% of portfolio value over 90 days.

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

Strategic Allocation Moderate  vs.  Eventide Limited Term Bond

Strategic Allocation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Eventide Limited Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eventide Limited Term Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Eventide Limited is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Strategic Allocation and Eventide Limited

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

The idea behind Strategic Allocation Moderate and Eventide Limited Term Bond 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..