Correlation Between Total Return and Balanced Fund
Can any of the company-specific risk be diversified away by investing in both Total Return and Balanced Fund 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 Total Return and Balanced Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Return Bond and Balanced Fund Institutional, you can compare the effects of market volatilities on Total Return and Balanced Fund 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 Total Return with a short position of Balanced Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Return and Balanced Fund.
Diversification Opportunities for Total Return and Balanced Fund
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Total and Balanced is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Bond and Balanced Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Instit and Total Return 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 Total Return Bond are associated (or correlated) with Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Instit has no effect on the direction of Total Return i.e., Total Return and Balanced Fund go up and down completely randomly.
Pair Corralation between Total Return and Balanced Fund
Assuming the 90 days horizon Total Return is expected to generate 3.98 times less return on investment than Balanced Fund. But when comparing it to its historical volatility, Total Return Bond is 4.84 times less risky than Balanced Fund. It trades about 0.16 of its potential returns per unit of risk. Balanced Fund Institutional is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,439 in Balanced Fund Institutional on August 31, 2024 and sell it today you would earn a total of 24.00 from holding Balanced Fund Institutional or generate 1.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Total Return Bond vs. Balanced Fund Institutional
Performance |
| Timeline |
| Total Return Bond |
| Balanced Fund Instit |
Total Return and Balanced Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Return and Balanced Fund
The main advantage of trading using opposite Total Return and Balanced Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Return position performs unexpectedly, Balanced Fund 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 Balanced Fund will offset losses from the drop in Balanced Fund's long position.| Total Return vs. Ab Select Equity | Total Return vs. Sarofim Equity | Total Return vs. Balanced Fund Retail | Total Return vs. Multimedia Portfolio Multimedia |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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