Correlation Between Value Line and Boston Partners

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

By analyzing existing cross correlation between Value Line Mid and Boston Partners All Cap, you can compare the effects of market volatilities on Value Line and Boston Partners 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 Value Line with a short position of Boston Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Line and Boston Partners.

Diversification Opportunities for Value Line and Boston Partners

0.61

Correlation Coefficient

Value Line  Boston Partners

Poor diversification

The 3 months correlation between Value and Boston is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Value Line Mid and Boston Partners All Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Partners All and Value Line 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 Value Line Mid are associated (or correlated) with Boston Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Partners All has no effect on the direction of Value Line i.e., Value Line and Boston Partners go up and down completely randomly.

Pair Corralation between Value Line and Boston Partners

Assuming the 90 days horizon Value Line Mid is expected to generate 0.47 times more return on investment than Boston Partners. However, Value Line Mid is 2.11 times less risky than Boston Partners. It trades about -0.19 of its potential returns per unit of risk. Boston Partners All Cap is currently generating about -0.28 per unit of risk. If you would invest  3,613  in Value Line Mid on September 20, 2024 and sell it today you would lose (155.00) from holding Value Line Mid or give up 4.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Value Line Mid  vs.  Boston Partners All Cap

Value Line Mid

Risk-Adjusted Performance

0 of 100

Very Weak

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

Boston Partners All

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Partners All Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Value Line and Boston Partners

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

The idea behind Value Line Mid and Boston Partners All Cap 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.