Correlation Between Bond Fund and Firsthand Alternative

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

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

Diversification Opportunities for Bond Fund and Firsthand Alternative

0.72

Correlation Coefficient

Bond Fund  Firsthand Alternative

Poor diversification

The 3 months correlation between Bond and Firsthand is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bond Fund Institutional and Firsthand Alternative Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firsthand Alternative and Bond Fund 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 Bond Fund Institutional are associated (or correlated) with Firsthand Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firsthand Alternative has no effect on the direction of Bond Fund i.e., Bond Fund and Firsthand Alternative go up and down completely randomly.

Pair Corralation between Bond Fund and Firsthand Alternative

Assuming the 90 days horizon Bond Fund Institutional is expected to under-perform the Firsthand Alternative. But the mutual fund apears to be less risky and, when comparing its historical volatility, Bond Fund Institutional is 5.08 times less risky than Firsthand Alternative. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Firsthand Alternative Energy is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,024  in Firsthand Alternative Energy on September 14, 2024 and sell it today you would lose (13.00) from holding Firsthand Alternative Energy or give up 1.27% of portfolio value over 90 days.

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

Bond Fund Institutional  vs.  Firsthand Alternative Energy

Bond Fund Institutional

Risk-Adjusted Performance

0 of 100

Very Weak

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

Firsthand Alternative

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bond Fund and Firsthand Alternative

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

The idea behind Bond Fund Institutional and Firsthand Alternative Energy 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.