Correlation Between Balanced Fund and Moderate Strategy

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

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

Diversification Opportunities for Balanced Fund and Moderate Strategy

0.99

Correlation Coefficient

Balanced Fund  Moderate Strategy

No risk reduction

The 3 months correlation between Balanced and Moderate is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Retail and Moderate Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderate Strategy and Balanced 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 Balanced Fund Retail are associated (or correlated) with Moderate Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderate Strategy has no effect on the direction of Balanced Fund i.e., Balanced Fund and Moderate Strategy go up and down completely randomly.

Pair Corralation between Balanced Fund and Moderate Strategy

Assuming the 90 days horizon Balanced Fund Retail is expected to generate 1.36 times more return on investment than Moderate Strategy. However, Balanced Fund is 1.36 times more volatile than Moderate Strategy Fund. It trades about 0.28 of its potential returns per unit of risk. Moderate Strategy Fund is currently generating about 0.26 per unit of risk. If you would invest  1,207  in Balanced Fund Retail on April 30, 2025 and sell it today you would earn a total of  99.00  from holding Balanced Fund Retail or generate 8.2% return on investment over 90 days.

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

Balanced Fund Retail  vs.  Moderate Strategy Fund

Balanced Fund Retail

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Retail are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Balanced Fund may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Moderate Strategy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Moderate Strategy Fund are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Moderate Strategy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Balanced Fund and Moderate Strategy

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

The idea behind Balanced Fund Retail and Moderate Strategy 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.