Correlation Between Floating Rate and James Balanced
Can any of the company-specific risk be diversified away by investing in both Floating Rate and James Balanced 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 Floating Rate and James Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Floating Rate Fund and James Balanced Golden, you can compare the effects of market volatilities on Floating Rate and James Balanced 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 Floating Rate with a short position of James Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Floating Rate and James Balanced.
Diversification Opportunities for Floating Rate and James Balanced
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Floating and James is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Floating Rate Fund and James Balanced Golden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Balanced Golden and Floating Rate 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 Floating Rate Fund are associated (or correlated) with James Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Balanced Golden has no effect on the direction of Floating Rate i.e., Floating Rate and James Balanced go up and down completely randomly.
Pair Corralation between Floating Rate and James Balanced
Assuming the 90 days horizon Floating Rate is expected to generate 2.12 times less return on investment than James Balanced. But when comparing it to its historical volatility, Floating Rate Fund is 2.89 times less risky than James Balanced. It trades about 0.16 of its potential returns per unit of risk. James Balanced Golden is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,176 in James Balanced Golden on September 3, 2024 and sell it today you would earn a total of 152.00 from holding James Balanced Golden or generate 6.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Floating Rate Fund vs. James Balanced Golden
Performance |
| Timeline |
| Floating Rate |
| James Balanced Golden |
Floating Rate and James Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Floating Rate and James Balanced
The main advantage of trading using opposite Floating Rate and James Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Floating Rate position performs unexpectedly, James Balanced 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 James Balanced will offset losses from the drop in James Balanced's long position.| Floating Rate vs. James Balanced Golden | Floating Rate vs. Global Gold Fund | Floating Rate vs. Europac Gold Fund | Floating Rate vs. Goldman Sachs Short |
| James Balanced vs. Vanguard Lifestrategy Moderate | James Balanced vs. Vanguard Lifestrategy Income | James Balanced vs. Vanguard Lifestrategy Growth | James Balanced vs. Vanguard Explorer Fund |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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