Correlation Between Morningstar Unconstrained and Astor Long/short

Can any of the company-specific risk be diversified away by investing in both Morningstar Unconstrained and Astor Long/short 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 Morningstar Unconstrained and Astor Long/short into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Morningstar Unconstrained Allocation and Astor Longshort Fund, you can compare the effects of market volatilities on Morningstar Unconstrained and Astor Long/short 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 Morningstar Unconstrained with a short position of Astor Long/short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Unconstrained and Astor Long/short.

Diversification Opportunities for Morningstar Unconstrained and Astor Long/short

0.84

Correlation Coefficient

Morningstar Unconstrained  Astor Long/short

Very poor diversification

The 3 months correlation between Morningstar and Astor is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Unconstrained Allo and Astor Longshort Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astor Long/short and Morningstar Unconstrained 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 Morningstar Unconstrained Allocation are associated (or correlated) with Astor Long/short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astor Long/short has no effect on the direction of Morningstar Unconstrained i.e., Morningstar Unconstrained and Astor Long/short go up and down completely randomly.

Pair Corralation between Morningstar Unconstrained and Astor Long/short

Assuming the 90 days horizon Morningstar Unconstrained is expected to generate 1.19 times less return on investment than Astor Long/short. In addition to that, Morningstar Unconstrained is 1.72 times more volatile than Astor Longshort Fund. It trades about 0.03 of its total potential returns per unit of risk. Astor Longshort Fund is currently generating about 0.06 per unit of volatility. If you would invest  1,319  in Astor Longshort Fund on March 13, 2024 and sell it today you would earn a total of  19.00  from holding Astor Longshort Fund or generate 1.44% return on investment over 90 days.

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

Morningstar Unconstrained Allo  vs.  Astor Longshort Fund

Morningstar Unconstrained

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Morningstar Unconstrained Allocation are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Morningstar Unconstrained is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Astor Long/short

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Morningstar Unconstrained and Astor Long/short

The main advantage of trading using opposite Morningstar Unconstrained and Astor Long/short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morningstar Unconstrained position performs unexpectedly, Astor Long/short 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 Astor Long/short will offset losses from the drop in Astor Long/short's long position.

The idea behind Morningstar Unconstrained Allocation and Astor Longshort 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.