Correlation Between Strategic Allocation and Balanced Fund

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

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

Diversification Opportunities for Strategic Allocation and Balanced Fund

1.0

Correlation Coefficient

Strategic Allocation  Balanced Fund

No risk reduction

The 3 months correlation between Strategic and Balanced is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Moderate and Balanced Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Investor and Strategic Allocation 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 Strategic Allocation Moderate are associated (or correlated) with Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Investor has no effect on the direction of Strategic Allocation i.e., Strategic Allocation and Balanced Fund go up and down completely randomly.

Pair Corralation between Strategic Allocation and Balanced Fund

Assuming the 90 days horizon Strategic Allocation is expected to generate 1.19 times less return on investment than Balanced Fund. But when comparing it to its historical volatility, Strategic Allocation Moderate is 1.07 times less risky than Balanced Fund. It trades about 0.21 of its potential returns per unit of risk. Balanced Fund Investor is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,886  in Balanced Fund Investor on May 6, 2025 and sell it today you would earn a total of  134.00  from holding Balanced Fund Investor or generate 7.1% return on investment over 90 days.

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

Strategic Allocation Moderate  vs.  Balanced Fund Investor

Strategic Allocation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Allocation Moderate are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Strategic Allocation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Balanced Fund Investor

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Investor are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Balanced Fund may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Strategic Allocation and Balanced Fund

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

The idea behind Strategic Allocation Moderate and Balanced 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.