Correlation Between Regional Bank and Core Bond
Can any of the company-specific risk be diversified away by investing in both Regional Bank and Core Bond 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 Regional Bank and Core Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Regional Bank Fund and Core Bond Fund, you can compare the effects of market volatilities on Regional Bank and Core Bond 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 Regional Bank with a short position of Core Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Bank and Core Bond.
Diversification Opportunities for Regional Bank and Core Bond
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Regional and Core is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Regional Bank Fund and Core Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Bond Fund and Regional Bank 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 Regional Bank Fund are associated (or correlated) with Core Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Bond Fund has no effect on the direction of Regional Bank i.e., Regional Bank and Core Bond go up and down completely randomly.
Pair Corralation between Regional Bank and Core Bond
Assuming the 90 days horizon Regional Bank Fund is expected to generate 4.95 times more return on investment than Core Bond. However, Regional Bank is 4.95 times more volatile than Core Bond Fund. It trades about 0.04 of its potential returns per unit of risk. Core Bond Fund is currently generating about 0.0 per unit of risk. If you would invest 2,522 in Regional Bank Fund on September 25, 2024 and sell it today you would earn a total of 333.00 from holding Regional Bank Fund or generate 13.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Regional Bank Fund vs. Core Bond Fund
Performance |
| Timeline |
| Regional Bank |
| Core Bond Fund |
Regional Bank and Core Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Regional Bank and Core Bond
The main advantage of trading using opposite Regional Bank and Core Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Bank position performs unexpectedly, Core Bond 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 Core Bond will offset losses from the drop in Core Bond's long position.| Regional Bank vs. Needham Small Cap | Regional Bank vs. Artisan Small Cap | Regional Bank vs. Champlain Small | Regional Bank vs. Vy Jpmorgan Small |
| Core Bond vs. Regional Bank Fund | Core Bond vs. Regional Bank Fund | Core Bond vs. Multimanager Lifestyle Moderate | Core Bond vs. Multimanager Lifestyle Balanced |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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