Correlation Between Value Fund and Value Line

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

By analyzing existing cross correlation between Value Fund R5 and Value Line Larger, you can compare the effects of market volatilities on Value Fund and Value Line 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 Value Fund with a short position of Value Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Value Line.

Diversification Opportunities for Value Fund and Value Line

0.92

Correlation Coefficient

Value Fund  Value Line

Almost no diversification

The 3 months correlation between Value and Value is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund R5 and Value Line Larger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Line Larger and Value Fund 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 Value Fund R5 are associated (or correlated) with Value Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Line Larger has no effect on the direction of Value Fund i.e., Value Fund and Value Line go up and down completely randomly.

Pair Corralation between Value Fund and Value Line

Assuming the 90 days horizon Value Fund is expected to generate 2.19 times less return on investment than Value Line. But when comparing it to its historical volatility, Value Fund R5 is 1.61 times less risky than Value Line. It trades about 0.13 of its potential returns per unit of risk. Value Line Larger is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,089  in Value Line Larger on May 18, 2025 and sell it today you would earn a total of  499.00  from holding Value Line Larger or generate 12.2% return on investment over 90 days.

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

Value Fund R5  vs.  Value Line Larger

Value Fund R5

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund R5 are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Value Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Value Line Larger

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Value Line Larger are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Value Line may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Value Fund and Value Line

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

The idea behind Value Fund R5 and Value Line Larger 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.