Correlation Between Balanced Fund and Absolute Convertible
Can any of the company-specific risk be diversified away by investing in both Balanced Fund 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 Balanced Fund and Absolute Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Fund Retail and Absolute Convertible Arbitrage, you can compare the effects of market volatilities on Balanced Fund 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 Balanced Fund with a short position of Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Absolute Convertible.
Diversification Opportunities for Balanced Fund and Absolute Convertible
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Balanced and Absolute is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Retail and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible and Balanced 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 Balanced Fund Retail 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 Balanced Fund i.e., Balanced Fund and Absolute Convertible go up and down completely randomly.
Pair Corralation between Balanced Fund and Absolute Convertible
Assuming the 90 days horizon Balanced Fund Retail is expected to generate 10.68 times more return on investment than Absolute Convertible. However, Balanced Fund is 10.68 times more volatile than Absolute Convertible Arbitrage. It trades about 0.11 of its potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about 0.56 per unit of risk. If you would invest 1,245 in Balanced Fund Retail on September 12, 2024 and sell it today you would earn a total of 211.00 from holding Balanced Fund Retail or generate 16.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Fund Retail vs. Absolute Convertible Arbitrage
Performance |
| Timeline |
| Balanced Fund Retail |
| Absolute Convertible |
Balanced Fund and Absolute Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Fund and Absolute Convertible
The main advantage of trading using opposite Balanced Fund and Absolute Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund 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.| Balanced Fund vs. Muirfield Fund Retail | Balanced Fund vs. Dynamic Growth Fund | Balanced Fund vs. Infrastructure Fund Retail | Balanced Fund vs. Quantex Fund Retail |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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