Correlation Between Absolute Convertible and Northern California
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Northern California 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 Northern California 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 Northern California Intermediate, you can compare the effects of market volatilities on Absolute Convertible and Northern California 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 Northern California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Northern California.
Diversification Opportunities for Absolute Convertible and Northern California
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Absolute and Northern is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Northern California Intermedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern California 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 Northern California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern California has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Northern California go up and down completely randomly.
Pair Corralation between Absolute Convertible and Northern California
Assuming the 90 days horizon Absolute Convertible Arbitrage is expected to generate 0.43 times more return on investment than Northern California. However, Absolute Convertible Arbitrage is 2.33 times less risky than Northern California. It trades about 0.27 of its potential returns per unit of risk. Northern California Intermediate is currently generating about 0.05 per unit of risk. If you would invest 1,020 in Absolute Convertible Arbitrage on November 27, 2024 and sell it today you would earn a total of 112.00 from holding Absolute Convertible Arbitrage or generate 10.98% 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. Northern California Intermedia
Performance |
| Timeline |
| Absolute Convertible |
| Northern California |
Absolute Convertible and Northern California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Northern California
The main advantage of trading using opposite Absolute Convertible and Northern California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Northern California 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 Northern California will offset losses from the drop in Northern California's long position.| Absolute Convertible vs. T Rowe Price | Absolute Convertible vs. Barings Active Short | Absolute Convertible vs. Touchstone Ultra Short | Absolute Convertible vs. Metropolitan West Ultra |
| Northern California vs. T Rowe Price | Northern California vs. Davis Series | Northern California vs. Jpmorgan Trust I | Northern California vs. Dreyfus Institutional Reserves |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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