Correlation Between Defensive Market and Value Equity
Can any of the company-specific risk be diversified away by investing in both Defensive Market and Value Equity 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 Defensive Market and Value Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Defensive Market Strategies and Value Equity Investor, you can compare the effects of market volatilities on Defensive Market and Value Equity 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 Defensive Market with a short position of Value Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defensive Market and Value Equity.
Diversification Opportunities for Defensive Market and Value Equity
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Defensive and Value is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Defensive Market Strategies and Value Equity Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Equity Investor and Defensive Market 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 Defensive Market Strategies are associated (or correlated) with Value Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Equity Investor has no effect on the direction of Defensive Market i.e., Defensive Market and Value Equity go up and down completely randomly.
Pair Corralation between Defensive Market and Value Equity
Assuming the 90 days horizon Defensive Market is expected to generate 2.64 times less return on investment than Value Equity. But when comparing it to its historical volatility, Defensive Market Strategies is 2.28 times less risky than Value Equity. It trades about 0.22 of its potential returns per unit of risk. Value Equity Investor is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,735 in Value Equity Investor on June 4, 2025 and sell it today you would earn a total of 224.00 from holding Value Equity Investor or generate 12.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Defensive Market Strategies vs. Value Equity Investor
Performance |
| Timeline |
| Defensive Market Str |
| Value Equity Investor |
Defensive Market and Value Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Defensive Market and Value Equity
The main advantage of trading using opposite Defensive Market and Value Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Defensive Market position performs unexpectedly, Value Equity 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 Value Equity will offset losses from the drop in Value Equity's long position.| Defensive Market vs. Siit High Yield | Defensive Market vs. Neuberger Berman Income | Defensive Market vs. City National Rochdale | Defensive Market vs. Blackrock High Yield |
| Value Equity vs. Tiaa Cref Life Money | Value Equity vs. John Hancock Money | Value Equity vs. Profunds Money | Value Equity vs. Edward Jones Money |
Check out your portfolio center.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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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