Correlation Between Fundamental Large and Floating Rate
Can any of the company-specific risk be diversified away by investing in both Fundamental Large 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 Fundamental Large and Floating Rate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fundamental Large Cap and Floating Rate Fund, you can compare the effects of market volatilities on Fundamental Large 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 Fundamental Large with a short position of Floating Rate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundamental Large and Floating Rate.
Diversification Opportunities for Fundamental Large and Floating Rate
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fundamental and Floating is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and Floating Rate Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floating Rate and Fundamental Large 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 Fundamental Large Cap 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 Fundamental Large i.e., Fundamental Large and Floating Rate go up and down completely randomly.
Pair Corralation between Fundamental Large and Floating Rate
Assuming the 90 days horizon Fundamental Large Cap is expected to generate 5.34 times more return on investment than Floating Rate. However, Fundamental Large is 5.34 times more volatile than Floating Rate Fund. It trades about 0.21 of its potential returns per unit of risk. Floating Rate Fund is currently generating about 0.24 per unit of risk. If you would invest 7,652 in Fundamental Large Cap on September 12, 2024 and sell it today you would earn a total of 732.00 from holding Fundamental Large Cap or generate 9.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Fundamental Large Cap vs. Floating Rate Fund
Performance |
| Timeline |
| Fundamental Large Cap |
| Floating Rate |
Fundamental Large and Floating Rate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fundamental Large and Floating Rate
The main advantage of trading using opposite Fundamental Large and Floating Rate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundamental Large 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.| Fundamental Large vs. Cref Money Market | Fundamental Large vs. Chestnut Street Exchange | Fundamental Large vs. Ubs Money Series | Fundamental Large vs. Schwab Treasury Money |
| Floating Rate vs. The National Tax Free | Floating Rate vs. Oklahoma Municipal Fund | Floating Rate vs. Dws Government Money | Floating Rate vs. Nuveen Minnesota Municipal |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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