Correlation Between Enhanced and Long-term
Can any of the company-specific risk be diversified away by investing in both Enhanced and Long-term 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 Enhanced and Long-term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enhanced Large Pany and Long Term Government Fund, you can compare the effects of market volatilities on Enhanced and Long-term 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 Enhanced with a short position of Long-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enhanced and Long-term.
Diversification Opportunities for Enhanced and Long-term
Pay attention - limited upside
The 3 months correlation between Enhanced and Long-term is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Enhanced Large Pany and Long Term Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long Term Government and Enhanced 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 Enhanced Large Pany are associated (or correlated) with Long-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long Term Government has no effect on the direction of Enhanced i.e., Enhanced and Long-term go up and down completely randomly.
Pair Corralation between Enhanced and Long-term
Assuming the 90 days horizon Enhanced Large Pany is expected to generate 1.03 times more return on investment than Long-term. However, Enhanced is 1.03 times more volatile than Long Term Government Fund. It trades about 0.16 of its potential returns per unit of risk. Long Term Government Fund is currently generating about -0.05 per unit of risk. If you would invest 1,508 in Enhanced Large Pany on August 28, 2024 and sell it today you would earn a total of 44.00 from holding Enhanced Large Pany or generate 2.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enhanced Large Pany vs. Long Term Government Fund
Performance |
| Timeline |
| Enhanced Large Pany |
| Long Term Government |
Enhanced and Long-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enhanced and Long-term
The main advantage of trading using opposite Enhanced and Long-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enhanced position performs unexpectedly, Long-term 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 Long-term will offset losses from the drop in Long-term's long position.| Enhanced vs. Us Micro Cap | Enhanced vs. Dfa Short Term Government | Enhanced vs. Emerging Markets Small | Enhanced vs. Aquagold International |
| Long-term vs. Aqr Large Cap | Long-term vs. Federated Mdt Large | Long-term vs. Enhanced Large Pany | Long-term vs. Qs Large Cap |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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