Correlation Between Value Line and Paradigm Select

Can any of the company-specific risk be diversified away by investing in both Value Line and Paradigm Select 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 Paradigm Select 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 Paradigm Select Fund, you can compare the effects of market volatilities on Value Line and Paradigm Select 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 Paradigm Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Line and Paradigm Select.

Diversification Opportunities for Value Line and Paradigm Select

0.28

Correlation Coefficient

Value Line  Paradigm Select

Modest diversification

The 3 months correlation between Value and Paradigm is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Value Line Mid and Paradigm Select Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm Select 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 Paradigm Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm Select has no effect on the direction of Value Line i.e., Value Line and Paradigm Select go up and down completely randomly.

Pair Corralation between Value Line and Paradigm Select

Assuming the 90 days horizon Value Line Mid is expected to under-perform the Paradigm Select. But the mutual fund apears to be less risky and, when comparing its historical volatility, Value Line Mid is 1.18 times less risky than Paradigm Select. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Paradigm Select Fund is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,100  in Paradigm Select Fund on September 24, 2024 and sell it today you would earn a total of  25.00  from holding Paradigm Select Fund or generate 0.31% return on investment over 90 days.

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

Value Line Mid  vs.  Paradigm Select Fund

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.

Paradigm Select

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Value Line and Paradigm Select

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

The idea behind Value Line Mid and Paradigm Select 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.