Correlation Between Absolute Convertible and Growth Allocation
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Growth Allocation 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 Growth Allocation 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 Growth Allocation Index, you can compare the effects of market volatilities on Absolute Convertible and Growth Allocation 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 Growth Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Growth Allocation.
Diversification Opportunities for Absolute Convertible and Growth Allocation
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Absolute and Growth is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Growth Allocation Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Allocation Index 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 Growth Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Allocation Index has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Growth Allocation go up and down completely randomly.
Pair Corralation between Absolute Convertible and Growth Allocation
Assuming the 90 days horizon Absolute Convertible Arbitrage is expected to under-perform the Growth Allocation. But the mutual fund apears to be less risky and, when comparing its historical volatility, Absolute Convertible Arbitrage is 2.86 times less risky than Growth Allocation. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Growth Allocation Index is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,108 in Growth Allocation Index on October 27, 2024 and sell it today you would earn a total of 9.00 from holding Growth Allocation Index or generate 0.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Growth Allocation Index
Performance |
| Timeline |
| Absolute Convertible |
| Growth Allocation Index |
Absolute Convertible and Growth Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Growth Allocation
The main advantage of trading using opposite Absolute Convertible and Growth Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Growth Allocation 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 Growth Allocation will offset losses from the drop in Growth Allocation's long position.| Absolute Convertible vs. Dodge Cox Stock | Absolute Convertible vs. Rational Strategic Allocation | Absolute Convertible vs. Growth Allocation Fund | Absolute Convertible vs. Tax Managed Large Cap |
| Growth Allocation vs. Federated Government Ultrashort | Growth Allocation vs. Davis Government Bond | Growth Allocation vs. Hsbc Government Money | Growth Allocation vs. Elfun Government Money |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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