Correlation Between Value Fund and Pro-blend(r) Moderate
Can any of the company-specific risk be diversified away by investing in both Value Fund and Pro-blend(r) Moderate 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 Value Fund and Pro-blend(r) Moderate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Value Fund I and Pro Blend Moderate Term, you can compare the effects of market volatilities on Value Fund and Pro-blend(r) Moderate 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 Value Fund with a short position of Pro-blend(r) Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Pro-blend(r) Moderate.
Diversification Opportunities for Value Fund and Pro-blend(r) Moderate
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Value and Pro-blend(r) is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund I and Pro Blend Moderate Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro-blend(r) Moderate and Value Fund 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 Value Fund I are associated (or correlated) with Pro-blend(r) Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro-blend(r) Moderate has no effect on the direction of Value Fund i.e., Value Fund and Pro-blend(r) Moderate go up and down completely randomly.
Pair Corralation between Value Fund and Pro-blend(r) Moderate
Assuming the 90 days horizon Value Fund I is expected to generate 1.32 times more return on investment than Pro-blend(r) Moderate. However, Value Fund is 1.32 times more volatile than Pro Blend Moderate Term. It trades about 0.04 of its potential returns per unit of risk. Pro Blend Moderate Term is currently generating about 0.04 per unit of risk. If you would invest 811.00 in Value Fund I on November 28, 2024 and sell it today you would earn a total of 3.00 from holding Value Fund I or generate 0.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Value Fund I vs. Pro Blend Moderate Term
Performance |
| Timeline |
| Value Fund I |
| Pro-blend(r) Moderate |
Value Fund and Pro-blend(r) Moderate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Fund and Pro-blend(r) Moderate
The main advantage of trading using opposite Value Fund and Pro-blend(r) Moderate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund position performs unexpectedly, Pro-blend(r) Moderate 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 Pro-blend(r) Moderate will offset losses from the drop in Pro-blend(r) Moderate's long position.| Value Fund vs. Intermediate Term Tax Free Bond | Value Fund vs. John Hancock Government | Value Fund vs. Virtus Seix Government | Value Fund vs. Vanguard Intermediate Term Government |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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