Correlation Between All Asset and Target Managed

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

By analyzing existing cross correlation between All Asset Fund and Target Managed Allocation, you can compare the effects of market volatilities on All Asset and Target Managed 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 All Asset with a short position of Target Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of All Asset and Target Managed.

Diversification Opportunities for All Asset and Target Managed

0.93

Correlation Coefficient

All Asset  Target Managed

Almost no diversification

The 3 months correlation between All and Target is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding All Asset Fund and Target Managed Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Managed Allocation and All Asset 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 All Asset Fund are associated (or correlated) with Target Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Managed Allocation has no effect on the direction of All Asset i.e., All Asset and Target Managed go up and down completely randomly.

Pair Corralation between All Asset and Target Managed

Assuming the 90 days horizon All Asset is expected to generate 1.71 times less return on investment than Target Managed. But when comparing it to its historical volatility, All Asset Fund is 1.58 times less risky than Target Managed. It trades about 0.15 of its potential returns per unit of risk. Target Managed Allocation is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,063  in Target Managed Allocation on May 14, 2025 and sell it today you would earn a total of  59.00  from holding Target Managed Allocation or generate 5.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

All Asset Fund  vs.  Target Managed Allocation

All Asset Fund

Risk-Adjusted Performance

Good

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

Target Managed Allocation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Target Managed Allocation are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Target Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with All Asset and Target Managed

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

The idea behind All Asset Fund and Target Managed Allocation 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.