Correlation Between Versatile Bond and Absolute Convertible
Can any of the company-specific risk be diversified away by investing in both Versatile Bond and Absolute Convertible 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 Versatile Bond and Absolute Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Versatile Bond Portfolio and Absolute Convertible Arbitrage, you can compare the effects of market volatilities on Versatile Bond and Absolute Convertible 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 Versatile Bond with a short position of Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Versatile Bond and Absolute Convertible.
Diversification Opportunities for Versatile Bond and Absolute Convertible
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Versatile and Absolute is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Versatile Bond Portfolio and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible and Versatile Bond 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 Versatile Bond Portfolio are associated (or correlated) with Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of Versatile Bond i.e., Versatile Bond and Absolute Convertible go up and down completely randomly.
Pair Corralation between Versatile Bond and Absolute Convertible
Assuming the 90 days horizon Versatile Bond Portfolio is expected to under-perform the Absolute Convertible. But the mutual fund apears to be less risky and, when comparing its historical volatility, Versatile Bond Portfolio is 1.56 times less risky than Absolute Convertible. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Absolute Convertible Arbitrage is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,138 in Absolute Convertible Arbitrage on September 26, 2024 and sell it today you would lose (2.00) from holding Absolute Convertible Arbitrage or give up 0.18% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Versatile Bond Portfolio vs. Absolute Convertible Arbitrage
Performance |
Timeline |
Versatile Bond Portfolio |
Absolute Convertible |
Versatile Bond and Absolute Convertible Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Versatile Bond and Absolute Convertible
The main advantage of trading using opposite Versatile Bond and Absolute Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Versatile Bond position performs unexpectedly, Absolute Convertible 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 Absolute Convertible will offset losses from the drop in Absolute Convertible's long position.Versatile Bond vs. Permanent Portfolio Class | Versatile Bond vs. Permanent Portfolio Class | Versatile Bond vs. Permanent Portfolio Class | Versatile Bond vs. Short Term Treasury Portfolio |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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