Correlation Between Equity Income and Advisors Capital
Can any of the company-specific risk be diversified away by investing in both Equity Income and Advisors Capital 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 Equity Income and Advisors Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Income Fund and Advisors Capital Dividend, you can compare the effects of market volatilities on Equity Income and Advisors Capital 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 Equity Income with a short position of Advisors Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Income and Advisors Capital.
Diversification Opportunities for Equity Income and Advisors Capital
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Equity and Advisors is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Equity Income Fund and Advisors Capital Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advisors Capital Dividend and Equity Income 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 Equity Income Fund are associated (or correlated) with Advisors Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advisors Capital Dividend has no effect on the direction of Equity Income i.e., Equity Income and Advisors Capital go up and down completely randomly.
Pair Corralation between Equity Income and Advisors Capital
Assuming the 90 days horizon Equity Income is expected to generate 1.28 times less return on investment than Advisors Capital. But when comparing it to its historical volatility, Equity Income Fund is 1.01 times less risky than Advisors Capital. It trades about 0.09 of its potential returns per unit of risk. Advisors Capital Dividend is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,069 in Advisors Capital Dividend on September 14, 2024 and sell it today you would earn a total of 203.00 from holding Advisors Capital Dividend or generate 18.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Income Fund vs. Advisors Capital Dividend
Performance |
| Timeline |
| Equity Income |
| Advisors Capital Dividend |
Equity Income and Advisors Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Income and Advisors Capital
The main advantage of trading using opposite Equity Income and Advisors Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Income position performs unexpectedly, Advisors Capital 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 Advisors Capital will offset losses from the drop in Advisors Capital's long position.| Equity Income vs. Europac Gold Fund | Equity Income vs. Global Gold Fund | Equity Income vs. Oppenheimer Gold Special | Equity Income vs. Gamco Global Gold |
| Advisors Capital vs. Advisors Capital Tactical | Advisors Capital vs. Equity Income Fund | Advisors Capital vs. Lord Abbett High | Advisors Capital vs. 1290 High Yield |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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