Correlation Between WM Technology and Growth Balanced

Can any of the company-specific risk be diversified away by investing in both WM Technology and Growth Balanced 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 WM Technology and Growth Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for WM Technology and Growth Balanced

0.5

Correlation Coefficient

WM Technology  Growth Balanced

Very weak diversification

The 3 months correlation between MAPS and Growth is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding WM Technology and Growth Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Balanced and WM Technology 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 WM Technology are associated (or correlated) with Growth Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Balanced has no effect on the direction of WM Technology i.e., WM Technology and Growth Balanced go up and down completely randomly.

Pair Corralation between WM Technology and Growth Balanced

Given the investment horizon of 90 days WM Technology is expected to generate 11.47 times more return on investment than Growth Balanced. However, WM Technology is 11.47 times more volatile than Growth Balanced Fund. It trades about 0.11 of its potential returns per unit of risk. Growth Balanced Fund is currently generating about 0.48 per unit of risk. If you would invest  87.00  in WM Technology on February 13, 2024 and sell it today you would earn a total of  27.00  from holding WM Technology or generate 31.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	15.87%
Values	Daily Returns

WM Technology  vs.  Growth Balanced Fund

WM Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WM Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, WM Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Growth Balanced

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days Growth Balanced Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Growth Balanced showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WM Technology and Growth Balanced

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

The idea behind WM Technology and Growth Balanced 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.