Correlation Between Versatile Bond and James Alpha

Can any of the company-specific risk be diversified away by investing in both Versatile Bond and James Alpha 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 James Alpha 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 James Alpha Structured, you can compare the effects of market volatilities on Versatile Bond and James Alpha 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 James Alpha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Versatile Bond and James Alpha.

Diversification Opportunities for Versatile Bond and James Alpha

0.08

Correlation Coefficient

Versatile Bond  James Alpha

Significant diversification

The 3 months correlation between Versatile and James is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Versatile Bond Portfolio and James Alpha Structured in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Alpha Structured 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 James Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Alpha Structured has no effect on the direction of Versatile Bond i.e., Versatile Bond and James Alpha go up and down completely randomly.

Pair Corralation between Versatile Bond and James Alpha

Assuming the 90 days horizon Versatile Bond Portfolio is expected to under-perform the James Alpha. In addition to that, Versatile Bond is 1.01 times more volatile than James Alpha Structured. It trades about -0.07 of its total potential returns per unit of risk. James Alpha Structured is currently generating about 0.11 per unit of volatility. If you would invest  1,006  in James Alpha Structured on September 20, 2024 and sell it today you would earn a total of  8.00  from holding James Alpha Structured or generate 0.8% return on investment over 90 days.

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

Versatile Bond Portfolio  vs.  James Alpha Structured

Versatile Bond Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

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

James Alpha Structured

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in James Alpha Structured are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, James Alpha is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Versatile Bond and James Alpha

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

The idea behind Versatile Bond Portfolio and James Alpha Structured 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.