Correlation Between Absolute Convertible and Old Westbury
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Old Westbury 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 Old Westbury 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 Old Westbury New, you can compare the effects of market volatilities on Absolute Convertible and Old Westbury 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 Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Old Westbury.
Diversification Opportunities for Absolute Convertible and Old Westbury
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Absolute and Old is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Old Westbury New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury New 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 Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury New has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Old Westbury go up and down completely randomly.
Pair Corralation between Absolute Convertible and Old Westbury
Assuming the 90 days horizon Absolute Convertible Arbitrage is expected to generate 0.29 times more return on investment than Old Westbury. However, Absolute Convertible Arbitrage is 3.41 times less risky than Old Westbury. It trades about 0.58 of its potential returns per unit of risk. Old Westbury New is currently generating about 0.03 per unit of risk. If you would invest 1,129 in Absolute Convertible Arbitrage on September 2, 2024 and sell it today you would earn a total of 21.00 from holding Absolute Convertible Arbitrage or generate 1.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Old Westbury New
Performance |
| Timeline |
| Absolute Convertible |
| Old Westbury New |
Absolute Convertible and Old Westbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Old Westbury
The main advantage of trading using opposite Absolute Convertible and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Old Westbury 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 Old Westbury will offset losses from the drop in Old Westbury'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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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