Correlation Between Applied Finance and Moderately Aggressive

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

By analyzing existing cross correlation between Applied Finance Explorer and Moderately Aggressive Balanced, you can compare the effects of market volatilities on Applied Finance and Moderately Aggressive 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 Applied Finance with a short position of Moderately Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Moderately Aggressive.

Diversification Opportunities for Applied Finance and Moderately Aggressive

0.88

Correlation Coefficient

Applied Finance  Moderately Aggressive

Very poor diversification

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

Pair Corralation between Applied Finance and Moderately Aggressive

Assuming the 90 days horizon Applied Finance Explorer is expected to generate 2.38 times more return on investment than Moderately Aggressive. However, Applied Finance is 2.38 times more volatile than Moderately Aggressive Balanced. It trades about 0.18 of its potential returns per unit of risk. Moderately Aggressive Balanced is currently generating about 0.21 per unit of risk. If you would invest  2,117  in Applied Finance Explorer on May 25, 2025 and sell it today you would earn a total of  258.00  from holding Applied Finance Explorer or generate 12.19% return on investment over 90 days.

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

Applied Finance Explorer  vs.  Moderately Aggressive Balanced

Applied Finance Explorer

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Finance Explorer are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Applied Finance may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Moderately Aggressive

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Moderately Aggressive Balanced are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Moderately Aggressive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Applied Finance and Moderately Aggressive

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

The idea behind Applied Finance Explorer and Moderately Aggressive Balanced 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.