Correlation Between Alternative Asset and Floating Rate
Can any of the company-specific risk be diversified away by investing in both Alternative Asset 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 Alternative Asset and Floating Rate 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 Floating Rate Fund, you can compare the effects of market volatilities on Alternative Asset 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 Alternative Asset with a short position of Floating Rate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alternative Asset and Floating Rate.
Diversification Opportunities for Alternative Asset and Floating Rate
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alternative and Floating is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Alternative Asset Allocation and Floating Rate Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floating Rate 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 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 Alternative Asset i.e., Alternative Asset and Floating Rate go up and down completely randomly.
Pair Corralation between Alternative Asset and Floating Rate
Assuming the 90 days horizon Alternative Asset is expected to generate 1.43 times less return on investment than Floating Rate. In addition to that, Alternative Asset is 1.27 times more volatile than Floating Rate Fund. It trades about 0.12 of its total potential returns per unit of risk. Floating Rate Fund is currently generating about 0.22 per unit of volatility. If you would invest 683.00 in Floating Rate Fund on August 31, 2024 and sell it today you would earn a total of 135.00 from holding Floating Rate Fund or generate 19.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alternative Asset Allocation vs. Floating Rate Fund
Performance |
| Timeline |
| Alternative Asset |
| Floating Rate |
Alternative Asset and Floating Rate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alternative Asset and Floating Rate
The main advantage of trading using opposite Alternative Asset and Floating Rate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alternative Asset 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.| Alternative Asset vs. Mfs International Diversification | Alternative Asset vs. HUMANA INC | Alternative Asset vs. Aquagold International | Alternative Asset vs. Barloworld Ltd ADR |
| Floating Rate vs. Strategic Allocation Aggressive | Floating Rate vs. Alternative Asset Allocation | Floating Rate vs. Federated Kaufmann Large | Floating Rate vs. Old Westbury Large |
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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