Correlation Between Absolute Convertible and Free Market
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Free 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 Absolute Convertible and Free Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Convertible Arbitrage and Free Market Fixed, you can compare the effects of market volatilities on Absolute Convertible and Free 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 Absolute Convertible with a short position of Free Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Free Market.
Diversification Opportunities for Absolute Convertible and Free Market
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Absolute and Free is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Free Market Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Free Market Fixed and Absolute Convertible 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 Absolute Convertible Arbitrage are associated (or correlated) with Free Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Free Market Fixed has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Free Market go up and down completely randomly.
Pair Corralation between Absolute Convertible and Free Market
Assuming the 90 days horizon Absolute Convertible Arbitrage is expected to generate 0.45 times more return on investment than Free Market. However, Absolute Convertible Arbitrage is 2.22 times less risky than Free Market. It trades about 0.58 of its potential returns per unit of risk. Free Market Fixed is currently generating about 0.21 per unit of risk. If you would invest 1,143 in Absolute Convertible Arbitrage on September 2, 2024 and sell it today you would earn a total of 7.00 from holding Absolute Convertible Arbitrage or generate 0.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Free Market Fixed
Performance |
| Timeline |
| Absolute Convertible |
| Free Market Fixed |
Absolute Convertible and Free Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Free Market
The main advantage of trading using opposite Absolute Convertible and Free Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Free 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 Free Market will offset losses from the drop in Free Market's long position.| Absolute Convertible vs. Angel Oak Multi Strategy | Absolute Convertible vs. Transamerica Emerging Markets | Absolute Convertible vs. Black Oak Emerging | Absolute Convertible vs. Barings Emerging Markets |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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