Correlation Between Defensive Market and Strategic Alternatives
Can any of the company-specific risk be diversified away by investing in both Defensive Market and Strategic Alternatives 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 Defensive Market and Strategic Alternatives into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Defensive Market Strategies and Strategic Alternatives Fund, you can compare the effects of market volatilities on Defensive Market and Strategic Alternatives 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 Defensive Market with a short position of Strategic Alternatives. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defensive Market and Strategic Alternatives.
Diversification Opportunities for Defensive Market and Strategic Alternatives
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Defensive and Strategic is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Defensive Market Strategies and Strategic Alternatives Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Alternatives and Defensive Market 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 Defensive Market Strategies are associated (or correlated) with Strategic Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Alternatives has no effect on the direction of Defensive Market i.e., Defensive Market and Strategic Alternatives go up and down completely randomly.
Pair Corralation between Defensive Market and Strategic Alternatives
Assuming the 90 days horizon Defensive Market Strategies is expected to generate 2.08 times more return on investment than Strategic Alternatives. However, Defensive Market is 2.08 times more volatile than Strategic Alternatives Fund. It trades about 0.25 of its potential returns per unit of risk. Strategic Alternatives Fund is currently generating about 0.28 per unit of risk. If you would invest 1,258 in Defensive Market Strategies on August 31, 2024 and sell it today you would earn a total of 33.00 from holding Defensive Market Strategies or generate 2.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Defensive Market Strategies vs. Strategic Alternatives Fund
Performance |
| Timeline |
| Defensive Market Str |
| Strategic Alternatives |
Defensive Market and Strategic Alternatives Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Defensive Market and Strategic Alternatives
The main advantage of trading using opposite Defensive Market and Strategic Alternatives positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Defensive Market position performs unexpectedly, Strategic Alternatives 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 Strategic Alternatives will offset losses from the drop in Strategic Alternatives' long position.| Defensive Market vs. Fpa Queens Road | Defensive Market vs. Amg River Road | Defensive Market vs. American Century Etf | Defensive Market vs. Lord Abbett Small |
| Strategic Alternatives vs. Pace High Yield | Strategic Alternatives vs. Aqr Risk Balanced Modities | Strategic Alternatives vs. Aquila Three Peaks | Strategic Alternatives vs. Franklin High Income |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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