Correlation Between Lifex Inflation-protec and Dynamic Allocation
Can any of the company-specific risk be diversified away by investing in both Lifex Inflation-protec and Dynamic Allocation 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 Dynamic Allocation 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 Dynamic Allocation Fund, you can compare the effects of market volatilities on Lifex Inflation-protec and Dynamic Allocation 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 Dynamic Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifex Inflation-protec and Dynamic Allocation.
Diversification Opportunities for Lifex Inflation-protec and Dynamic Allocation
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lifex and Dynamic is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lifex Inflation Protected Inco and Dynamic Allocation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Allocation 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 Dynamic Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Allocation has no effect on the direction of Lifex Inflation-protec i.e., Lifex Inflation-protec and Dynamic Allocation go up and down completely randomly.
Pair Corralation between Lifex Inflation-protec and Dynamic Allocation
Assuming the 90 days horizon Lifex Inflation-protec is expected to generate 2.18 times less return on investment than Dynamic Allocation. But when comparing it to its historical volatility, Lifex Inflation Protected Income is 1.64 times less risky than Dynamic Allocation. It trades about 0.07 of its potential returns per unit of risk. Dynamic Allocation Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 842.00 in Dynamic Allocation Fund on August 28, 2024 and sell it today you would earn a total of 234.00 from holding Dynamic Allocation Fund or generate 27.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 44.04% |
| Values | Daily Returns |
Lifex Inflation Protected Inco vs. Dynamic Allocation Fund
Performance |
| Timeline |
| Lifex Inflation-protec |
| Dynamic Allocation |
Lifex Inflation-protec and Dynamic Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifex Inflation-protec and Dynamic Allocation
The main advantage of trading using opposite Lifex Inflation-protec and Dynamic Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifex Inflation-protec position performs unexpectedly, Dynamic Allocation 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 Dynamic Allocation will offset losses from the drop in Dynamic Allocation's long position.The idea behind Lifex Inflation Protected Income and Dynamic Allocation Fund 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.
| Dynamic Allocation vs. Mid Cap Index | Dynamic Allocation vs. Mid Cap Strategic | Dynamic Allocation vs. Valic Company I | Dynamic Allocation vs. Valic Company I |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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