Correlation Between Applied Finance and Money Market
Can any of the company-specific risk be diversified away by investing in both Applied Finance and Money Market 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 Applied Finance and Money Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Explorer and Money Market Obligations, you can compare the effects of market volatilities on Applied Finance and Money Market 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 Applied Finance with a short position of Money Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Money Market.
Diversification Opportunities for Applied Finance and Money Market
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Applied and Money is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Money Market Obligations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Money Market Obligations and Applied Finance 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 Applied Finance Explorer are associated (or correlated) with Money Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Money Market Obligations has no effect on the direction of Applied Finance i.e., Applied Finance and Money Market go up and down completely randomly.
Pair Corralation between Applied Finance and Money Market
Assuming the 90 days horizon Applied Finance is expected to generate 6.77 times less return on investment than Money Market. But when comparing it to its historical volatility, Applied Finance Explorer is 10.57 times less risky than Money Market. It trades about 0.05 of its potential returns per unit of risk. Money Market Obligations is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 92.00 in Money Market Obligations on September 12, 2024 and sell it today you would earn a total of 8.00 from holding Money Market Obligations or generate 8.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Finance Explorer vs. Money Market Obligations
Performance |
| Timeline |
| Applied Finance Explorer |
| Money Market Obligations |
Applied Finance and Money Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Finance and Money Market
The main advantage of trading using opposite Applied Finance and Money Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance position performs unexpectedly, Money Market 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 Money Market will offset losses from the drop in Money Market's long position.| Applied Finance vs. Thrivent Small Cap | Applied Finance vs. Applied Finance Select | Applied Finance vs. Parnassus Endeavor Fund | Applied Finance vs. Queens Road Small |
| Money Market vs. Palm Valley Capital | Money Market vs. Applied Finance Explorer | Money Market vs. Ab Discovery Value | Money Market vs. Fpa Queens Road |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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