Correlation Between Alternative Asset and Value Fund
Can any of the company-specific risk be diversified away by investing in both Alternative Asset and Value Fund 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 Alternative Asset and Value Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alternative Asset Allocation and Value Fund Value, you can compare the effects of market volatilities on Alternative Asset and Value Fund 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 Alternative Asset with a short position of Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alternative Asset and Value Fund.
Diversification Opportunities for Alternative Asset and Value Fund
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alternative and Value is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Alternative Asset Allocation and Value Fund Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund Value and Alternative Asset 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 Alternative Asset Allocation are associated (or correlated) with Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund Value has no effect on the direction of Alternative Asset i.e., Alternative Asset and Value Fund go up and down completely randomly.
Pair Corralation between Alternative Asset and Value Fund
Assuming the 90 days horizon Alternative Asset is expected to generate 2.56 times less return on investment than Value Fund. But when comparing it to its historical volatility, Alternative Asset Allocation is 3.3 times less risky than Value Fund. It trades about 0.11 of its potential returns per unit of risk. Value Fund Value is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,352 in Value Fund Value on September 3, 2024 and sell it today you would earn a total of 1,440 from holding Value Fund Value or generate 33.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alternative Asset Allocation vs. Value Fund Value
Performance |
| Timeline |
| Alternative Asset |
| Value Fund Value |
Alternative Asset and Value Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alternative Asset and Value Fund
The main advantage of trading using opposite Alternative Asset and Value Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alternative Asset position performs unexpectedly, Value Fund 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 Value Fund will offset losses from the drop in Value Fund's long position.The idea behind Alternative Asset Allocation and Value Fund Value pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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