Correlation Between Spectrum Income and Moderate Balanced

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

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

Diversification Opportunities for Spectrum Income and Moderate Balanced

0.73

Correlation Coefficient

Spectrum Income  Moderate Balanced

Poor diversification

The 3 months correlation between Spectrum and Moderate is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Income Fund and Moderate Balanced Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderate Balanced and Spectrum Income 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 Spectrum Income Fund are associated (or correlated) with Moderate Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderate Balanced has no effect on the direction of Spectrum Income i.e., Spectrum Income and Moderate Balanced go up and down completely randomly.

Pair Corralation between Spectrum Income and Moderate Balanced

Assuming the 90 days horizon Spectrum Income is expected to generate 1.84 times less return on investment than Moderate Balanced. But when comparing it to its historical volatility, Spectrum Income Fund is 2.56 times less risky than Moderate Balanced. It trades about 0.24 of its potential returns per unit of risk. Moderate Balanced Allocation is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,200  in Moderate Balanced Allocation on May 18, 2025 and sell it today you would earn a total of  59.00  from holding Moderate Balanced Allocation or generate 4.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Spectrum Income Fund  vs.  Moderate Balanced Allocation

Spectrum Income

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Spectrum Income Fund are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Spectrum Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Moderate Balanced

Risk-Adjusted Performance

Good

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

Pair Trading with Spectrum Income and Moderate Balanced

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

The idea behind Spectrum Income Fund and Moderate Balanced 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.

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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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.