Correlation Between Infrastructure Fund and Dividend Opportunities

Can any of the company-specific risk be diversified away by investing in both Infrastructure Fund and Dividend Opportunities 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 Infrastructure Fund and Dividend Opportunities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Infrastructure Fund Institutional and Dividend Opportunities Fund, you can compare the effects of market volatilities on Infrastructure Fund and Dividend Opportunities 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 Infrastructure Fund with a short position of Dividend Opportunities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infrastructure Fund and Dividend Opportunities.

Diversification Opportunities for Infrastructure Fund and Dividend Opportunities

0.98

Correlation Coefficient

Infrastructure Fund  Dividend Opportunities

Almost no diversification

The 3 months correlation between INFRASTRUCTURE and Dividend is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Infrastructure Fund Institutio and Dividend Opportunities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dividend Opportunities and Infrastructure Fund 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 Infrastructure Fund Institutional are associated (or correlated) with Dividend Opportunities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dividend Opportunities has no effect on the direction of Infrastructure Fund i.e., Infrastructure Fund and Dividend Opportunities go up and down completely randomly.

Pair Corralation between Infrastructure Fund and Dividend Opportunities

Assuming the 90 days horizon Infrastructure Fund is expected to generate 1.47 times less return on investment than Dividend Opportunities. But when comparing it to its historical volatility, Infrastructure Fund Institutional is 1.22 times less risky than Dividend Opportunities. It trades about 0.05 of its potential returns per unit of risk. Dividend Opportunities Fund is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,096  in Dividend Opportunities Fund on February 10, 2024 and sell it today you would earn a total of  144.00  from holding Dividend Opportunities Fund or generate 13.14% return on investment over 90 days.

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

Infrastructure Fund Institutio  vs.  Dividend Opportunities Fund

Infrastructure Fund

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Infrastructure Fund Institutional are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Infrastructure Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dividend Opportunities

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dividend Opportunities Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Dividend Opportunities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Infrastructure Fund and Dividend Opportunities

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

The idea behind Infrastructure Fund Institutional and Dividend Opportunities 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.