Correlation Between Sprucegrove International and Scharf Fund

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

By analyzing existing cross correlation between Sprucegrove International Equity and Scharf Fund Institutional, you can compare the effects of market volatilities on Sprucegrove International and Scharf 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 Sprucegrove International with a short position of Scharf Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprucegrove International and Scharf Fund.

Diversification Opportunities for Sprucegrove International and Scharf Fund

0.41

Correlation Coefficient

Sprucegrove International  Scharf Fund

Very weak diversification

The 3 months correlation between Sprucegrove and Scharf is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sprucegrove International Equi and Scharf Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scharf Fund Institutional and Sprucegrove International 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 Sprucegrove International Equity are associated (or correlated) with Scharf Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scharf Fund Institutional has no effect on the direction of Sprucegrove International i.e., Sprucegrove International and Scharf Fund go up and down completely randomly.

Pair Corralation between Sprucegrove International and Scharf Fund

Assuming the 90 days horizon Sprucegrove International Equity is expected to generate 1.14 times more return on investment than Scharf Fund. However, Sprucegrove International is 1.14 times more volatile than Scharf Fund Institutional. It trades about 0.32 of its potential returns per unit of risk. Scharf Fund Institutional is currently generating about -0.09 per unit of risk. If you would invest  5,900  in Sprucegrove International Equity on January 25, 2025 and sell it today you would earn a total of  952.00  from holding Sprucegrove International Equity or generate 16.14% return on investment over 90 days.

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

Sprucegrove International Equi  vs.  Scharf Fund Institutional

Sprucegrove International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sprucegrove International Equity are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Sprucegrove International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Scharf Fund Institutional

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sprucegrove International and Scharf Fund

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

The idea behind Sprucegrove International Equity and Scharf Fund Institutional 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.