Correlation Between 1290 Smartbeta and 1290 Funds

Can any of the company-specific risk be diversified away by investing in both 1290 Smartbeta and 1290 Funds 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 1290 Smartbeta and 1290 Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1290 Smartbeta Equity and 1290 Funds , you can compare the effects of market volatilities on 1290 Smartbeta and 1290 Funds 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 1290 Smartbeta with a short position of 1290 Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1290 Smartbeta and 1290 Funds.

Diversification Opportunities for 1290 Smartbeta and 1290 Funds

0.81

Correlation Coefficient

1290 Smartbeta  1290 Funds

Very poor diversification

The 3 months correlation between 1290 and 1290 is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding 1290 Smartbeta Equity and 1290 Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1290 Funds and 1290 Smartbeta 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 1290 Smartbeta Equity are associated (or correlated) with 1290 Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1290 Funds has no effect on the direction of 1290 Smartbeta i.e., 1290 Smartbeta and 1290 Funds go up and down completely randomly.

Pair Corralation between 1290 Smartbeta and 1290 Funds

Assuming the 90 days horizon 1290 Smartbeta Equity is expected to generate 0.49 times more return on investment than 1290 Funds. However, 1290 Smartbeta Equity is 2.03 times less risky than 1290 Funds. It trades about -0.02 of its potential returns per unit of risk. 1290 Funds is currently generating about -0.11 per unit of risk. If you would invest  1,745  in 1290 Smartbeta Equity on January 31, 2024 and sell it today you would lose (11.00) from holding 1290 Smartbeta Equity or give up 0.63% of portfolio value over 90 days.

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

1290 Smartbeta Equity  vs.  1290 Funds

1290 Smartbeta Equity

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 1290 Smartbeta Equity are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, 1290 Smartbeta is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

1290 Funds

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 1290 Funds are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, 1290 Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 1290 Smartbeta and 1290 Funds

The main advantage of trading using opposite 1290 Smartbeta and 1290 Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1290 Smartbeta position performs unexpectedly, 1290 Funds 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 1290 Funds will offset losses from the drop in 1290 Funds' long position.

The idea behind 1290 Smartbeta Equity and 1290 Funds 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.