Correlation Between Enhanced Fixed and Financial Industries
Can any of the company-specific risk be diversified away by investing in both Enhanced Fixed and Financial Industries 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 Enhanced Fixed and Financial Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enhanced Fixed Income and Financial Industries Fund, you can compare the effects of market volatilities on Enhanced Fixed and Financial Industries 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 Enhanced Fixed with a short position of Financial Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enhanced Fixed and Financial Industries.
Diversification Opportunities for Enhanced Fixed and Financial Industries
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Enhanced and Financial is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Enhanced Fixed Income and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries and Enhanced Fixed 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 Enhanced Fixed Income are associated (or correlated) with Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Enhanced Fixed i.e., Enhanced Fixed and Financial Industries go up and down completely randomly.
Pair Corralation between Enhanced Fixed and Financial Industries
Assuming the 90 days horizon Enhanced Fixed is expected to generate 3.33 times less return on investment than Financial Industries. But when comparing it to its historical volatility, Enhanced Fixed Income is 2.68 times less risky than Financial Industries. It trades about 0.03 of its potential returns per unit of risk. Financial Industries Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,488 in Financial Industries Fund on October 11, 2024 and sell it today you would earn a total of 329.00 from holding Financial Industries Fund or generate 22.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.19% |
| Values | Daily Returns |
Enhanced Fixed Income vs. Financial Industries Fund
Performance |
| Timeline |
| Enhanced Fixed Income |
| Financial Industries |
Enhanced Fixed and Financial Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enhanced Fixed and Financial Industries
The main advantage of trading using opposite Enhanced Fixed and Financial Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enhanced Fixed position performs unexpectedly, Financial Industries 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 Financial Industries will offset losses from the drop in Financial Industries' long position.| Enhanced Fixed vs. Virtus High Yield | Enhanced Fixed vs. Siit High Yield | Enhanced Fixed vs. Dunham High Yield | Enhanced Fixed vs. Msift High Yield |
| Financial Industries vs. Enhanced Fixed Income | Financial Industries vs. T Rowe Price | Financial Industries vs. Georgia Tax Free Bond | Financial Industries vs. Metropolitan West Porate |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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