Correlation Between Moderately Aggressive and Moderately Conservative

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

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

Diversification Opportunities for Moderately Aggressive and Moderately Conservative

0.0

Correlation Coefficient

Moderately Aggressive  Moderately Conservative

Pay attention - limited upside

The 3 months correlation between Moderately and Moderately is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Moderately Aggressive Balanced and Moderately Servative Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderately Conservative and Moderately Aggressive 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 Moderately Aggressive Balanced are associated (or correlated) with Moderately Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderately Conservative has no effect on the direction of Moderately Aggressive i.e., Moderately Aggressive and Moderately Conservative go up and down completely randomly.

Pair Corralation between Moderately Aggressive and Moderately Conservative

If you would invest  1,093  in Moderately Servative Balanced on May 4, 2025 and sell it today you would earn a total of  79.00  from holding Moderately Servative Balanced or generate 7.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Moderately Aggressive Balanced  vs.  Moderately Servative Balanced

Moderately Aggressive

Risk-Adjusted Performance

Solid

Over the last 90 days Moderately Aggressive Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Moderately Aggressive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Moderately Conservative

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Moderately Servative Balanced are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Moderately Conservative may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Moderately Aggressive and Moderately Conservative

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

The idea behind Moderately Aggressive Balanced and Moderately Servative Balanced 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.