Correlation Between Active Bond and Sentinel International

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

Diversification Opportunities for Active Bond and Sentinel International

0.52

Correlation Coefficient

Active Bond  Sentinel International

Very weak diversification

The 3 months correlation between Active and Sentinel is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Active Bond Fund and Sentinel International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentinel International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentinel International has no effect on the direction of Active Bond i.e., Active Bond and Sentinel International go up and down completely randomly.

Pair Corralation between Active Bond and Sentinel International

Assuming the 90 days horizon Active Bond Fund is expected to generate 0.28 times more return on investment than Sentinel International. However, Active Bond Fund is 3.53 times less risky than Sentinel International. It trades about -0.18 of its potential returns per unit of risk. Sentinel International Equity is currently generating about -0.18 per unit of risk. If you would invest  964.00  in Active Bond Fund on September 20, 2024 and sell it today you would lose (32.00) from holding Active Bond Fund or give up 3.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Active Bond Fund  vs.  Sentinel International Equity

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 International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sentinel International Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Active Bond and Sentinel International

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

The idea behind Active Bond Fund and Sentinel International Equity 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.