Correlation Between SPACE and Short-term Bond

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

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

Diversification Opportunities for SPACE and Short-term Bond

-0.31

Correlation Coefficient

SPACE  Short-term Bond

Very good diversification

The 3 months correlation between SPACE and Short-term is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and Short Term Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Bond and SPACE 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 SPACE are associated (or correlated) with Short-term Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Bond has no effect on the direction of SPACE i.e., SPACE and Short-term Bond go up and down completely randomly.

Pair Corralation between SPACE and Short-term Bond

Assuming the 90 days horizon SPACE is expected to generate 41.74 times more return on investment than Short-term Bond. However, SPACE is 41.74 times more volatile than Short Term Bond Fund. It trades about 0.2 of its potential returns per unit of risk. Short Term Bond Fund is currently generating about 0.03 per unit of risk. If you would invest  34.00  in SPACE on September 3, 2024 and sell it today you would earn a total of  25.00  from holding SPACE or generate 73.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

SPACE  vs.  Short Term Bond Fund

SPACE

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Short Term Bond

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with SPACE and Short-term Bond

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

The idea behind SPACE and Short Term Bond Fund 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.