Correlation Between Rational Defensive and Floating Rate
Can any of the company-specific risk be diversified away by investing in both Rational Defensive and Floating Rate 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 Rational Defensive and Floating Rate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rational Defensive Growth and Floating Rate Fund, you can compare the effects of market volatilities on Rational Defensive and Floating Rate 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 Rational Defensive with a short position of Floating Rate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Defensive and Floating Rate.
Diversification Opportunities for Rational Defensive and Floating Rate
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Rational and Floating is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Floating Rate Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floating Rate and Rational Defensive 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 Rational Defensive Growth are associated (or correlated) with Floating Rate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Floating Rate has no effect on the direction of Rational Defensive i.e., Rational Defensive and Floating Rate go up and down completely randomly.
Pair Corralation between Rational Defensive and Floating Rate
If you would invest 3,933 in Rational Defensive Growth on September 13, 2024 and sell it today you would earn a total of 196.00 from holding Rational Defensive Growth or generate 4.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rational Defensive Growth vs. Floating Rate Fund
Performance |
| Timeline |
| Rational Defensive Growth |
| Floating Rate |
Rational Defensive and Floating Rate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rational Defensive and Floating Rate
The main advantage of trading using opposite Rational Defensive and Floating Rate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Defensive position performs unexpectedly, Floating Rate 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 Floating Rate will offset losses from the drop in Floating Rate's long position.| Rational Defensive vs. Transamerica Emerging Markets | Rational Defensive vs. Black Oak Emerging | Rational Defensive vs. Siit Emerging Markets | Rational Defensive vs. Origin Emerging Markets |
| Floating Rate vs. Ab Global Bond | Floating Rate vs. Ab Global Real | Floating Rate vs. Jhancock Global Equity | Floating Rate vs. Siit Global Managed |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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