Correlation Between Fabwx and Absolute Convertible
Can any of the company-specific risk be diversified away by investing in both Fabwx and Absolute Convertible 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 Fabwx and Absolute Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fabwx and Absolute Convertible Arbitrage, you can compare the effects of market volatilities on Fabwx and Absolute Convertible 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 Fabwx with a short position of Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fabwx and Absolute Convertible.
Diversification Opportunities for Fabwx and Absolute Convertible
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fabwx and Absolute is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fabwx and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible and Fabwx 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 Fabwx are associated (or correlated) with Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of Fabwx i.e., Fabwx and Absolute Convertible go up and down completely randomly.
Pair Corralation between Fabwx and Absolute Convertible
Assuming the 90 days horizon Fabwx is expected to generate 23.62 times more return on investment than Absolute Convertible. However, Fabwx is 23.62 times more volatile than Absolute Convertible Arbitrage. It trades about 0.12 of its potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about 0.63 per unit of risk. If you would invest 1,503 in Fabwx on November 3, 2024 and sell it today you would earn a total of 53.00 from holding Fabwx or generate 3.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fabwx vs. Absolute Convertible Arbitrage
Performance |
| Timeline |
| Fabwx |
| Absolute Convertible |
Fabwx and Absolute Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fabwx and Absolute Convertible
The main advantage of trading using opposite Fabwx and Absolute Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fabwx position performs unexpectedly, Absolute Convertible 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 Absolute Convertible will offset losses from the drop in Absolute Convertible's long position.| Fabwx vs. Federated Government Income | Fabwx vs. Intermediate Term Tax Free Bond | Fabwx vs. Jpmorgan Ultra Short Municipal | Fabwx vs. California Municipal Portfolio |
| Absolute Convertible vs. Gabelli Gold Fund | Absolute Convertible vs. Deutsche Gold Precious | Absolute Convertible vs. James Balanced Golden | Absolute Convertible vs. World Precious Minerals |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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