Correlation Between Grizzly Short and Federated Prudent

Can any of the company-specific risk be diversified away by investing in both Grizzly Short and Federated Prudent 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 Grizzly Short and Federated Prudent into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Grizzly Short Fund and Federated Prudent Bear, you can compare the effects of market volatilities on Grizzly Short and Federated Prudent 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 Grizzly Short with a short position of Federated Prudent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grizzly Short and Federated Prudent.

Diversification Opportunities for Grizzly Short and Federated Prudent

0.9

Correlation Coefficient

Grizzly Short  Federated Prudent

Almost no diversification

The 3 months correlation between Grizzly and Federated is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Grizzly Short Fund and Federated Prudent Bear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Prudent Bear and Grizzly Short 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 Grizzly Short Fund are associated (or correlated) with Federated Prudent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Prudent Bear has no effect on the direction of Grizzly Short i.e., Grizzly Short and Federated Prudent go up and down completely randomly.

Pair Corralation between Grizzly Short and Federated Prudent

Assuming the 90 days horizon Grizzly Short is expected to generate 1.12 times less return on investment than Federated Prudent. In addition to that, Grizzly Short is 1.03 times more volatile than Federated Prudent Bear. It trades about 0.17 of its total potential returns per unit of risk. Federated Prudent Bear is currently generating about 0.19 per unit of volatility. If you would invest  563.00  in Federated Prudent Bear on January 29, 2024 and sell it today you would earn a total of  18.00  from holding Federated Prudent Bear or generate 3.2% return on investment over 90 days.

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

Grizzly Short Fund  vs.  Federated Prudent Bear

Grizzly Short

Risk-Adjusted Performance

0 of 100

Very Weak

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

Federated Prudent Bear

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Grizzly Short and Federated Prudent

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

The idea behind Grizzly Short Fund and Federated Prudent Bear 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.