Correlation Between Rational Defensive and Preferred Securities
Can any of the company-specific risk be diversified away by investing in both Rational Defensive and Preferred Securities 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 Preferred Securities 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 Preferred Securities Fund, you can compare the effects of market volatilities on Rational Defensive and Preferred Securities 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 Preferred Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Defensive and Preferred Securities.
Diversification Opportunities for Rational Defensive and Preferred Securities
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rational and Preferred is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Preferred Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Securities 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 Preferred Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Securities has no effect on the direction of Rational Defensive i.e., Rational Defensive and Preferred Securities go up and down completely randomly.
Pair Corralation between Rational Defensive and Preferred Securities
Assuming the 90 days horizon Rational Defensive Growth is expected to generate 8.07 times more return on investment than Preferred Securities. However, Rational Defensive is 8.07 times more volatile than Preferred Securities Fund. It trades about 0.13 of its potential returns per unit of risk. Preferred Securities Fund is currently generating about 0.28 per unit of risk. If you would invest 3,439 in Rational Defensive Growth on September 1, 2024 and sell it today you would earn a total of 603.00 from holding Rational Defensive Growth or generate 17.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Rational Defensive Growth vs. Preferred Securities Fund
Performance |
| Timeline |
| Rational Defensive Growth |
| Preferred Securities |
Rational Defensive and Preferred Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rational Defensive and Preferred Securities
The main advantage of trading using opposite Rational Defensive and Preferred Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Defensive position performs unexpectedly, Preferred Securities 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 Preferred Securities will offset losses from the drop in Preferred Securities' long position.| Rational Defensive vs. Lord Abbett Convertible | Rational Defensive vs. Rationalpier 88 Convertible | Rational Defensive vs. Advent Claymore Convertible | Rational Defensive vs. The Gamco Global |
| Preferred Securities vs. Mesirow Financial Small | Preferred Securities vs. Prudential Jennison Financial | Preferred Securities vs. 1919 Financial Services | Preferred Securities vs. Gabelli Global Financial |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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