Correlation Between Absolute Convertible and Short Duration
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Short Duration 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 Short Duration 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 Short Duration Bond, you can compare the effects of market volatilities on Absolute Convertible and Short Duration 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 Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Short Duration.
Diversification Opportunities for Absolute Convertible and Short Duration
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Absolute and Short is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Short Duration Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Bond 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 Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Bond has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Short Duration go up and down completely randomly.
Pair Corralation between Absolute Convertible and Short Duration
Assuming the 90 days horizon Absolute Convertible Arbitrage is expected to generate 0.67 times more return on investment than Short Duration. However, Absolute Convertible Arbitrage is 1.48 times less risky than Short Duration. It trades about 0.66 of its potential returns per unit of risk. Short Duration Bond is currently generating about 0.26 per unit of risk. If you would invest 1,118 in Absolute Convertible Arbitrage on November 3, 2024 and sell it today you would earn a total of 9.00 from holding Absolute Convertible Arbitrage or generate 0.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Short Duration Bond
Performance |
| Timeline |
| Absolute Convertible |
| Short Duration Bond |
Absolute Convertible and Short Duration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Short Duration
The main advantage of trading using opposite Absolute Convertible and Short Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Short Duration 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 Short Duration will offset losses from the drop in Short Duration's long position.| Absolute Convertible vs. Gabelli Gold Fund | Absolute Convertible vs. Deutsche Gold Precious | Absolute Convertible vs. James Balanced Golden | Absolute Convertible vs. World Precious Minerals |
| Short Duration vs. Multi Manager High Yield | Short Duration vs. Jpmorgan High Yield | Short Duration vs. Buffalo High Yield | Short Duration vs. Six Circles Credit |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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