Correlation Between Intermediate Term and Technology Fund

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

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

Diversification Opportunities for Intermediate Term and Technology Fund

0.86

Correlation Coefficient

Intermediate Term  Technology Fund

Very poor diversification

The 3 months correlation between Intermediate and Technology is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Bond Fund and Technology Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Fund Class and Intermediate Term 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 Intermediate Term Bond Fund are associated (or correlated) with Technology Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Fund Class has no effect on the direction of Intermediate Term i.e., Intermediate Term and Technology Fund go up and down completely randomly.

Pair Corralation between Intermediate Term and Technology Fund

Assuming the 90 days horizon Intermediate Term is expected to generate 6.1 times less return on investment than Technology Fund. But when comparing it to its historical volatility, Intermediate Term Bond Fund is 3.52 times less risky than Technology Fund. It trades about 0.16 of its potential returns per unit of risk. Technology Fund Class is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  16,373  in Technology Fund Class on June 25, 2025 and sell it today you would earn a total of  2,787  from holding Technology Fund Class or generate 17.02% return on investment over 90 days.

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

Intermediate Term Bond Fund  vs.  Technology Fund Class

Intermediate Term Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Term Bond Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Intermediate Term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Technology Fund Class

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Fund Class are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Technology Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intermediate Term and Technology Fund

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

The idea behind Intermediate Term Bond Fund and Technology Fund Class 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..