Correlation Between Absolute Convertible and Kensington Managed
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Kensington Managed 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 Kensington Managed 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 Kensington Managed Income, you can compare the effects of market volatilities on Absolute Convertible and Kensington Managed 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 Kensington Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Kensington Managed.
Diversification Opportunities for Absolute Convertible and Kensington Managed
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Absolute and Kensington is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Kensington Managed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Managed Income 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 Kensington Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Managed Income has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Kensington Managed go up and down completely randomly.
Pair Corralation between Absolute Convertible and Kensington Managed
Assuming the 90 days horizon Absolute Convertible Arbitrage is expected to generate 0.26 times more return on investment than Kensington Managed. However, Absolute Convertible Arbitrage is 3.91 times less risky than Kensington Managed. It trades about 0.44 of its potential returns per unit of risk. Kensington Managed Income is currently generating about 0.1 per unit of risk. If you would invest 1,054 in Absolute Convertible Arbitrage on September 12, 2024 and sell it today you would earn a total of 97.00 from holding Absolute Convertible Arbitrage or generate 9.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Kensington Managed Income
Performance |
| Timeline |
| Absolute Convertible |
| Kensington Managed Income |
Absolute Convertible and Kensington Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Kensington Managed
The main advantage of trading using opposite Absolute Convertible and Kensington Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Kensington Managed 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 Kensington Managed will offset losses from the drop in Kensington Managed's long position.| Absolute Convertible vs. Vy Goldman Sachs | Absolute Convertible vs. Invesco Gold Special | Absolute Convertible vs. Short Precious Metals | Absolute Convertible vs. Franklin Gold Precious |
| Kensington Managed vs. Calamos Dynamic Convertible | Kensington Managed vs. Rationalpier 88 Convertible | Kensington Managed vs. Gabelli Convertible And | Kensington Managed vs. Absolute Convertible Arbitrage |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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