Correlation Between Defensive Market and Low Duration
Can any of the company-specific risk be diversified away by investing in both Defensive Market and Low Duration 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 Low Duration 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 Low Duration Bond Institutional, you can compare the effects of market volatilities on Defensive Market and Low Duration 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 Low Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defensive Market and Low Duration.
Diversification Opportunities for Defensive Market and Low Duration
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Defensive and Low is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Defensive Market Strategies and Low Duration Bond Institutiona in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Low Duration Bond 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 Low Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Low Duration Bond has no effect on the direction of Defensive Market i.e., Defensive Market and Low Duration go up and down completely randomly.
Pair Corralation between Defensive Market and Low Duration
Assuming the 90 days horizon Defensive Market Strategies is expected to generate 5.27 times more return on investment than Low Duration. However, Defensive Market is 5.27 times more volatile than Low Duration Bond Institutional. It trades about 0.22 of its potential returns per unit of risk. Low Duration Bond Institutional is currently generating about 0.29 per unit of risk. If you would invest 1,173 in Defensive Market Strategies on November 9, 2024 and sell it today you would earn a total of 22.00 from holding Defensive Market Strategies or generate 1.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Defensive Market Strategies vs. Low Duration Bond Institutiona
Performance |
| Timeline |
| Defensive Market Str |
| Low Duration Bond |
Defensive Market and Low Duration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Defensive Market and Low Duration
The main advantage of trading using opposite Defensive Market and Low Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Defensive Market position performs unexpectedly, Low Duration 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 Low Duration will offset losses from the drop in Low Duration's long position.| Defensive Market vs. Financial Industries Fund | Defensive Market vs. Fidelity Advisor Financial | Defensive Market vs. Financial Services Portfolio | Defensive Market vs. Blackrock Financial Institutions |
| Low Duration vs. Fisher Large Cap | Low Duration vs. Americafirst Large Cap | Low Duration vs. Fidelity Large Cap | Low Duration vs. Calvert 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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