Correlation Between Technology Fund and Retailing Fund

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

By analyzing existing cross correlation between Technology Fund Investor and Retailing Fund Investor, you can compare the effects of market volatilities on Technology Fund and Retailing Fund 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 Retailing Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Fund and Retailing Fund.

Diversification Opportunities for Technology Fund and Retailing Fund

0.75

Correlation Coefficient

Technology Fund  Retailing Fund

Poor diversification

The 3 months correlation between Technology and Retailing is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Technology Fund Investor and Retailing Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retailing Fund Investor 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 Investor are associated (or correlated) with Retailing Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retailing Fund Investor has no effect on the direction of Technology Fund i.e., Technology Fund and Retailing Fund go up and down completely randomly.

Pair Corralation between Technology Fund and Retailing Fund

Assuming the 90 days horizon Technology Fund Investor is expected to generate 1.14 times more return on investment than Retailing Fund. However, Technology Fund is 1.14 times more volatile than Retailing Fund Investor. It trades about 0.21 of its potential returns per unit of risk. Retailing Fund Investor is currently generating about 0.17 per unit of risk. If you would invest  20,860  in Technology Fund Investor on May 28, 2025 and sell it today you would earn a total of  2,628  from holding Technology Fund Investor or generate 12.6% return on investment over 90 days.

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

Technology Fund Investor  vs.  Retailing Fund Investor

Technology Fund Investor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Fund Investor are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Technology Fund may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Retailing Fund Investor

Risk-Adjusted Performance

Good

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

Pair Trading with Technology Fund and Retailing Fund

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

The idea behind Technology Fund Investor and Retailing Fund Investor 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.