Correlation Between Short Duration and Pax E
Can any of the company-specific risk be diversified away by investing in both Short Duration and Pax E 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 Short Duration and Pax E into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Duration Inflation and Pax E Bond, you can compare the effects of market volatilities on Short Duration and Pax E 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 Short Duration with a short position of Pax E. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Duration and Pax E.
Diversification Opportunities for Short Duration and Pax E
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Short and Pax is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Short Duration Inflation and Pax E Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax E Bond and Short Duration 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 Short Duration Inflation are associated (or correlated) with Pax E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax E Bond has no effect on the direction of Short Duration i.e., Short Duration and Pax E go up and down completely randomly.
Pair Corralation between Short Duration and Pax E
Assuming the 90 days horizon Short Duration is expected to generate 1.05 times less return on investment than Pax E. But when comparing it to its historical volatility, Short Duration Inflation is 1.96 times less risky than Pax E. It trades about 0.09 of its potential returns per unit of risk. Pax E Bond is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 810.00 in Pax E Bond on September 14, 2024 and sell it today you would earn a total of 73.00 from holding Pax E Bond or generate 9.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Duration Inflation vs. Pax E Bond
Performance |
| Timeline |
| Short Duration Inflation |
| Pax E Bond |
Short Duration and Pax E Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short Duration and Pax E
The main advantage of trading using opposite Short Duration and Pax E positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Duration position performs unexpectedly, Pax E 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 Pax E will offset losses from the drop in Pax E's long position.| Short Duration vs. Needham Aggressive Growth | Short Duration vs. Franklin Growth Opportunities | Short Duration vs. T Rowe Price | Short Duration vs. L Abbett Growth |
| Pax E vs. Lord Abbett Health | Pax E vs. Live Oak Health | Pax E vs. Alphacentric Lifesci Healthcare | Pax E vs. Tekla Healthcare Opportunities |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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