Correlation Between Lifex Inflation-protec and Salient Tactical
Can any of the company-specific risk be diversified away by investing in both Lifex Inflation-protec and Salient Tactical 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 Lifex Inflation-protec and Salient Tactical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifex Inflation Protected Income and Salient Tactical Growth, you can compare the effects of market volatilities on Lifex Inflation-protec and Salient Tactical 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 Lifex Inflation-protec with a short position of Salient Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifex Inflation-protec and Salient Tactical.
Diversification Opportunities for Lifex Inflation-protec and Salient Tactical
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lifex and Salient is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lifex Inflation Protected Inco and Salient Tactical Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salient Tactical Growth and Lifex Inflation-protec 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 Lifex Inflation Protected Income are associated (or correlated) with Salient Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salient Tactical Growth has no effect on the direction of Lifex Inflation-protec i.e., Lifex Inflation-protec and Salient Tactical go up and down completely randomly.
Pair Corralation between Lifex Inflation-protec and Salient Tactical
If you would invest 2,534 in Salient Tactical Growth on August 27, 2024 and sell it today you would earn a total of 52.00 from holding Salient Tactical Growth or generate 2.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifex Inflation Protected Inco vs. Salient Tactical Growth
Performance |
| Timeline |
| Lifex Inflation-protec |
| Salient Tactical Growth |
Lifex Inflation-protec and Salient Tactical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifex Inflation-protec and Salient Tactical
The main advantage of trading using opposite Lifex Inflation-protec and Salient Tactical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifex Inflation-protec position performs unexpectedly, Salient Tactical 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 Salient Tactical will offset losses from the drop in Salient Tactical's long position.The idea behind Lifex Inflation Protected Income and Salient Tactical Growth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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