Correlation Between Limited Duration and Cavanal Hill

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

By analyzing existing cross correlation between Limited Duration Fund and Cavanal Hill Ultra, you can compare the effects of market volatilities on Limited Duration and Cavanal Hill 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 Limited Duration with a short position of Cavanal Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Limited Duration and Cavanal Hill.

Diversification Opportunities for Limited Duration and Cavanal Hill

-0.49

Correlation Coefficient

Limited Duration  Cavanal Hill

Very good diversification

The 3 months correlation between Limited and Cavanal is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Limited Duration Fund and Cavanal Hill Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cavanal Hill Ultra and Limited Duration 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 Limited Duration Fund are associated (or correlated) with Cavanal Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cavanal Hill Ultra has no effect on the direction of Limited Duration i.e., Limited Duration and Cavanal Hill go up and down completely randomly.

Pair Corralation between Limited Duration and Cavanal Hill

Assuming the 90 days horizon Limited Duration Fund is expected to under-perform the Cavanal Hill. In addition to that, Limited Duration is 2.61 times more volatile than Cavanal Hill Ultra. It trades about -0.04 of its total potential returns per unit of risk. Cavanal Hill Ultra is currently generating about 0.16 per unit of volatility. If you would invest  994.00  in Cavanal Hill Ultra on September 13, 2024 and sell it today you would earn a total of  5.00  from holding Cavanal Hill Ultra or generate 0.5% return on investment over 90 days.

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

Limited Duration Fund  vs.  Cavanal Hill Ultra

Limited Duration

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cavanal Hill Ultra

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Limited Duration and Cavanal Hill

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

The idea behind Limited Duration Fund and Cavanal Hill Ultra 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..