Correlation Between Short Duration and Strategic Income
Can any of the company-specific risk be diversified away by investing in both Short Duration and Strategic Income 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 Short Duration and Strategic Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Duration Strategic and Strategic Income Fund, you can compare the effects of market volatilities on Short Duration and Strategic Income 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 Short Duration with a short position of Strategic Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Duration and Strategic Income.
Diversification Opportunities for Short Duration and Strategic Income
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Short and Strategic is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Short Duration Strategic and Strategic Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Income and Short Duration 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 Short Duration Strategic are associated (or correlated) with Strategic Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Income has no effect on the direction of Short Duration i.e., Short Duration and Strategic Income go up and down completely randomly.
Pair Corralation between Short Duration and Strategic Income
Assuming the 90 days horizon Short Duration is expected to generate 1.11 times less return on investment than Strategic Income. But when comparing it to its historical volatility, Short Duration Strategic is 1.33 times less risky than Strategic Income. It trades about 0.24 of its potential returns per unit of risk. Strategic Income Fund is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 894.00 in Strategic Income Fund on September 12, 2024 and sell it today you would earn a total of 7.00 from holding Strategic Income Fund or generate 0.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Short Duration Strategic vs. Strategic Income Fund
Performance |
| Timeline |
| Short Duration Strategic |
| Strategic Income |
Short Duration and Strategic Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short Duration and Strategic Income
The main advantage of trading using opposite Short Duration and Strategic Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Duration position performs unexpectedly, Strategic Income 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 Strategic Income will offset losses from the drop in Strategic Income's long position.| Short Duration vs. SCOR PK | Short Duration vs. Morningstar Unconstrained Allocation | Short Duration vs. Via Renewables | Short Duration vs. Bondbloxx ETF Trust |
| Strategic Income vs. Legg Mason Global | Strategic Income vs. Mirova Global Green | Strategic Income vs. Qs Global Equity | Strategic Income vs. Artisan Global Unconstrained |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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