Correlation Between Plumb Balanced and Direxion Hilton

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

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

Diversification Opportunities for Plumb Balanced and Direxion Hilton

0.88

Correlation Coefficient

Plumb Balanced  Direxion Hilton

Very poor diversification

The 3 months correlation between Plumb and Direxion is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Plumb Balanced Fund and Direxion Hilton Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Hilton Tactical and Plumb Balanced 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 Plumb Balanced Fund are associated (or correlated) with Direxion Hilton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Hilton Tactical has no effect on the direction of Plumb Balanced i.e., Plumb Balanced and Direxion Hilton go up and down completely randomly.

Pair Corralation between Plumb Balanced and Direxion Hilton

Assuming the 90 days horizon Plumb Balanced Fund is expected to generate 1.75 times more return on investment than Direxion Hilton. However, Plumb Balanced is 1.75 times more volatile than Direxion Hilton Tactical. It trades about 0.32 of its potential returns per unit of risk. Direxion Hilton Tactical is currently generating about 0.45 per unit of risk. If you would invest  3,650  in Plumb Balanced Fund on February 21, 2024 and sell it today you would earn a total of  146.00  from holding Plumb Balanced Fund or generate 4.0% return on investment over 90 days.

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

Plumb Balanced Fund  vs.  Direxion Hilton Tactical

Plumb Balanced

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plumb Balanced Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Plumb Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Direxion Hilton Tactical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Hilton Tactical are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Direxion Hilton is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Plumb Balanced and Direxion Hilton

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

The idea behind Plumb Balanced Fund and Direxion Hilton Tactical 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.