Correlation Between Active Bond and Sentinel Small

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

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

Diversification Opportunities for Active Bond and Sentinel Small

-0.32

Correlation Coefficient

Active Bond  Sentinel Small

Very good diversification

The 3 months correlation between Active and Sentinel is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Active Bond Fund and Sentinel Small Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentinel Small Pany and Active 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 Active Bond Fund are associated (or correlated) with Sentinel Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentinel Small Pany has no effect on the direction of Active Bond i.e., Active Bond and Sentinel Small go up and down completely randomly.

Pair Corralation between Active Bond and Sentinel Small

Assuming the 90 days horizon Active Bond Fund is expected to generate 0.25 times more return on investment than Sentinel Small. However, Active Bond Fund is 4.08 times less risky than Sentinel Small. It trades about -0.2 of its potential returns per unit of risk. Sentinel Small Pany is currently generating about -0.05 per unit of risk. If you would invest  964.00  in Active Bond Fund on September 21, 2024 and sell it today you would lose (37.00) from holding Active Bond Fund or give up 3.84% of portfolio value over 90 days.

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

Active Bond Fund  vs.  Sentinel Small Pany

Active Bond Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sentinel Small Pany

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Active Bond and Sentinel Small

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

The idea behind Active Bond Fund and Sentinel Small Pany 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.