Correlation Between Multisector Bond and Banking Fund
Can any of the company-specific risk be diversified away by investing in both Multisector Bond and Banking Fund 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 Multisector Bond and Banking Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multisector Bond Sma and Banking Fund Class, you can compare the effects of market volatilities on Multisector Bond and Banking Fund 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 Multisector Bond with a short position of Banking Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multisector Bond and Banking Fund.
Diversification Opportunities for Multisector Bond and Banking Fund
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Multisector and Banking is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Multisector Bond Sma and Banking Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banking Fund Class and Multisector Bond 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 Multisector Bond Sma are associated (or correlated) with Banking Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banking Fund Class has no effect on the direction of Multisector Bond i.e., Multisector Bond and Banking Fund go up and down completely randomly.
Pair Corralation between Multisector Bond and Banking Fund
Assuming the 90 days horizon Multisector Bond is expected to generate 12.79 times less return on investment than Banking Fund. But when comparing it to its historical volatility, Multisector Bond Sma is 3.81 times less risky than Banking Fund. It trades about 0.09 of its potential returns per unit of risk. Banking Fund Class is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 7,416 in Banking Fund Class on November 3, 2024 and sell it today you would earn a total of 576.00 from holding Banking Fund Class or generate 7.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multisector Bond Sma vs. Banking Fund Class
Performance |
| Timeline |
| Multisector Bond Sma |
| Banking Fund Class |
Multisector Bond and Banking Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multisector Bond and Banking Fund
The main advantage of trading using opposite Multisector Bond and Banking Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multisector Bond position performs unexpectedly, Banking Fund 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 Banking Fund will offset losses from the drop in Banking Fund's long position.| Multisector Bond vs. Applied Finance Explorer | Multisector Bond vs. Fpa Queens Road | Multisector Bond vs. Valic Company I | Multisector Bond vs. Small Cap Value |
| Banking Fund vs. Valic Company I | Banking Fund vs. Fidelity Small Cap | Banking Fund vs. Vanguard Small Cap Value | Banking Fund vs. William Blair Small |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
Other Complementary Tools
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |