Correlation Between Technology Fund and Applied Finance

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

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

Diversification Opportunities for Technology Fund and Applied Finance

0.96

Correlation Coefficient

Technology Fund  Applied Finance

Almost no diversification

The 3 months correlation between Technology and Applied is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Technology Fund Class and Applied Finance Explorer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Finance Explorer and Technology 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 Technology Fund Class are associated (or correlated) with Applied Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Finance Explorer has no effect on the direction of Technology Fund i.e., Technology Fund and Applied Finance go up and down completely randomly.

Pair Corralation between Technology Fund and Applied Finance

Assuming the 90 days horizon Technology Fund Class is expected to generate 1.19 times more return on investment than Applied Finance. However, Technology Fund is 1.19 times more volatile than Applied Finance Explorer. It trades about 0.43 of its potential returns per unit of risk. Applied Finance Explorer is currently generating about 0.24 per unit of risk. If you would invest  14,581  in Technology Fund Class on April 20, 2025 and sell it today you would earn a total of  5,702  from holding Technology Fund Class or generate 39.11% return on investment over 90 days.

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

Technology Fund Class  vs.  Applied Finance Explorer

Technology Fund Class

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Fund Class are ranked lower than 33 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Technology Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Applied Finance Explorer

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Finance Explorer are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Applied Finance showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Technology Fund and Applied Finance

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

The idea behind Technology Fund Class and Applied Finance Explorer 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.