Correlation Between Balanced Strategy and Aggressive Investors
Can any of the company-specific risk be diversified away by investing in both Balanced Strategy and Aggressive Investors 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 Strategy and Aggressive Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Strategy Fund and Aggressive Investors 1, you can compare the effects of market volatilities on Balanced Strategy and Aggressive Investors 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 Strategy with a short position of Aggressive Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Strategy and Aggressive Investors.
Diversification Opportunities for Balanced Strategy and Aggressive Investors
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Balanced and Aggressive is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy Fund and Aggressive Investors 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Investors and Balanced Strategy 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 Strategy Fund are associated (or correlated) with Aggressive Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Investors has no effect on the direction of Balanced Strategy i.e., Balanced Strategy and Aggressive Investors go up and down completely randomly.
Pair Corralation between Balanced Strategy and Aggressive Investors
Assuming the 90 days horizon Balanced Strategy is expected to generate 1.27 times less return on investment than Aggressive Investors. But when comparing it to its historical volatility, Balanced Strategy Fund is 1.62 times less risky than Aggressive Investors. It trades about 0.21 of its potential returns per unit of risk. Aggressive Investors 1 is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 10,061 in Aggressive Investors 1 on June 5, 2025 and sell it today you would earn a total of 686.00 from holding Aggressive Investors 1 or generate 6.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Strategy Fund vs. Aggressive Investors 1
Performance |
| Timeline |
| Balanced Strategy |
| Aggressive Investors |
Balanced Strategy and Aggressive Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Strategy and Aggressive Investors
The main advantage of trading using opposite Balanced Strategy and Aggressive Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Strategy position performs unexpectedly, Aggressive Investors 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 Aggressive Investors will offset losses from the drop in Aggressive Investors' long position.| Balanced Strategy vs. International Developed Markets | Balanced Strategy vs. Global Real Estate | Balanced Strategy vs. Global Real Estate | Balanced Strategy vs. Global Real Estate |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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