Correlation Between Investment Grade and Aam Select
Can any of the company-specific risk be diversified away by investing in both Investment Grade and Aam Select 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 Investment Grade and Aam Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Investment Grade Porate and Aam Select Income, you can compare the effects of market volatilities on Investment Grade and Aam Select 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 Investment Grade with a short position of Aam Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment Grade and Aam Select.
Diversification Opportunities for Investment Grade and Aam Select
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Investment and Aam is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Investment Grade Porate and Aam Select Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aam Select Income and Investment Grade 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 Investment Grade Porate are associated (or correlated) with Aam Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aam Select Income has no effect on the direction of Investment Grade i.e., Investment Grade and Aam Select go up and down completely randomly.
Pair Corralation between Investment Grade and Aam Select
Assuming the 90 days horizon Investment Grade Porate is expected to generate 1.02 times more return on investment than Aam Select. However, Investment Grade is 1.02 times more volatile than Aam Select Income. It trades about 0.09 of its potential returns per unit of risk. Aam Select Income is currently generating about 0.04 per unit of risk. If you would invest 898.00 in Investment Grade Porate on August 31, 2024 and sell it today you would earn a total of 7.00 from holding Investment Grade Porate or generate 0.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investment Grade Porate vs. Aam Select Income
Performance |
| Timeline |
| Investment Grade Porate |
| Aam Select Income |
Investment Grade and Aam Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investment Grade and Aam Select
The main advantage of trading using opposite Investment Grade and Aam Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment Grade position performs unexpectedly, Aam Select 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 Aam Select will offset losses from the drop in Aam Select's long position.| Investment Grade vs. Investment Of America | Investment Grade vs. Investment Grade Bond | Investment Grade vs. Investment Grade Bond | Investment Grade vs. Investment Grade Bond |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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