Correlation Between Absolute Convertible and Plumb Balanced
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Plumb Balanced 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 Plumb Balanced 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 Plumb Balanced, you can compare the effects of market volatilities on Absolute Convertible and Plumb Balanced 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 Plumb Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Plumb Balanced.
Diversification Opportunities for Absolute Convertible and Plumb Balanced
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Absolute and Plumb is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Plumb Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plumb Balanced 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 Plumb Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plumb Balanced has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Plumb Balanced go up and down completely randomly.
Pair Corralation between Absolute Convertible and Plumb Balanced
Assuming the 90 days horizon Absolute Convertible is expected to generate 3.52 times less return on investment than Plumb Balanced. But when comparing it to its historical volatility, Absolute Convertible Arbitrage is 10.74 times less risky than Plumb Balanced. It trades about 0.37 of its potential returns per unit of risk. Plumb Balanced is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,714 in Plumb Balanced on September 14, 2024 and sell it today you would earn a total of 1,368 from holding Plumb Balanced or generate 50.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Plumb Balanced
Performance |
| Timeline |
| Absolute Convertible |
| Plumb Balanced |
Absolute Convertible and Plumb Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Plumb Balanced
The main advantage of trading using opposite Absolute Convertible and Plumb Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Plumb Balanced 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 Plumb Balanced will offset losses from the drop in Plumb Balanced's long position.| Absolute Convertible vs. Allianzgi Convertible Income | Absolute Convertible vs. Lord Abbett Convertible | Absolute Convertible vs. Rationalpier 88 Convertible | Absolute Convertible vs. Virtus Convertible |
| Plumb Balanced vs. John Hancock Money | Plumb Balanced vs. Ab Government Exchange | Plumb Balanced vs. Blackrock Exchange Portfolio | Plumb Balanced vs. The Gabelli 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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