Correlation Between Aggressive Allocation and Fabxx
Can any of the company-specific risk be diversified away by investing in both Aggressive Allocation and Fabxx 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 Aggressive Allocation and Fabxx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aggressive Allocation Fund and Fabxx, you can compare the effects of market volatilities on Aggressive Allocation and Fabxx 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 Aggressive Allocation with a short position of Fabxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aggressive Allocation and Fabxx.
Diversification Opportunities for Aggressive Allocation and Fabxx
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aggressive and Fabxx is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Aggressive Allocation Fund and Fabxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabxx and Aggressive Allocation 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 Aggressive Allocation Fund are associated (or correlated) with Fabxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fabxx has no effect on the direction of Aggressive Allocation i.e., Aggressive Allocation and Fabxx go up and down completely randomly.
Pair Corralation between Aggressive Allocation and Fabxx
Assuming the 90 days horizon Aggressive Allocation Fund is expected to generate 0.15 times more return on investment than Fabxx. However, Aggressive Allocation Fund is 6.69 times less risky than Fabxx. It trades about 0.22 of its potential returns per unit of risk. Fabxx is currently generating about -0.06 per unit of risk. If you would invest 1,336 in Aggressive Allocation Fund on September 3, 2024 and sell it today you would earn a total of 38.00 from holding Aggressive Allocation Fund or generate 2.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aggressive Allocation Fund vs. Fabxx
Performance |
| Timeline |
| Aggressive Allocation |
| Fabxx |
Aggressive Allocation and Fabxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aggressive Allocation and Fabxx
The main advantage of trading using opposite Aggressive Allocation and Fabxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aggressive Allocation position performs unexpectedly, Fabxx 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 Fabxx will offset losses from the drop in Fabxx's long position.The idea behind Aggressive Allocation Fund and Fabxx pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Fabxx vs. Vanguard Total Stock | Fabxx vs. Vanguard 500 Index | Fabxx vs. Vanguard Total Stock | Fabxx vs. Vanguard Total Stock |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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