Correlation Between Investment and Investment Grade
Can any of the company-specific risk be diversified away by investing in both Investment and Investment Grade 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 Investment and Investment Grade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Investment Of America and Investment Grade Bond, you can compare the effects of market volatilities on Investment and Investment Grade 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 Investment with a short position of Investment Grade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment and Investment Grade.
Diversification Opportunities for Investment and Investment Grade
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Investment and Investment is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Investment Of America and Investment Grade Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Grade Bond and Investment 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 Investment Of America are associated (or correlated) with Investment Grade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Grade Bond has no effect on the direction of Investment i.e., Investment and Investment Grade go up and down completely randomly.
Pair Corralation between Investment and Investment Grade
Assuming the 90 days horizon Investment Of America is expected to generate 2.25 times more return on investment than Investment Grade. However, Investment is 2.25 times more volatile than Investment Grade Bond. It trades about 0.13 of its potential returns per unit of risk. Investment Grade Bond is currently generating about 0.08 per unit of risk. If you would invest 6,124 in Investment Of America on August 28, 2024 and sell it today you would earn a total of 135.00 from holding Investment Of America or generate 2.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investment Of America vs. Investment Grade Bond
Performance |
| Timeline |
| Investment Of America |
| Investment Grade Bond |
Investment and Investment Grade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investment and Investment Grade
The main advantage of trading using opposite Investment and Investment Grade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment position performs unexpectedly, Investment Grade 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 Investment Grade will offset losses from the drop in Investment Grade's long position.| Investment vs. Small Pany Growth | Investment vs. Vanguard Small Cap Index | Investment vs. Ancorathelen Small Mid Cap | Investment vs. Nationwide Small Cap |
| Investment Grade vs. International Developed Markets | Investment Grade vs. Global Real Estate | Investment Grade vs. Global Real Estate | Investment Grade vs. Global Real Estate |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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