Correlation Between Short-term Income and Litman Gregory
Can any of the company-specific risk be diversified away by investing in both Short-term Income and Litman Gregory 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 Short-term Income and Litman Gregory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Term Income Fund and Litman Gregory Masters, you can compare the effects of market volatilities on Short-term Income and Litman Gregory 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 Short-term Income with a short position of Litman Gregory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Income and Litman Gregory.
Diversification Opportunities for Short-term Income and Litman Gregory
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Short-term and Litman is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Income Fund and Litman Gregory Masters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Masters and Short-term Income 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 Short Term Income Fund are associated (or correlated) with Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Masters has no effect on the direction of Short-term Income i.e., Short-term Income and Litman Gregory go up and down completely randomly.
Pair Corralation between Short-term Income and Litman Gregory
Assuming the 90 days horizon Short-term Income is expected to generate 3.34 times less return on investment than Litman Gregory. But when comparing it to its historical volatility, Short Term Income Fund is 2.35 times less risky than Litman Gregory. It trades about 0.14 of its potential returns per unit of risk. Litman Gregory Masters is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,077 in Litman Gregory Masters on September 5, 2024 and sell it today you would earn a total of 9.00 from holding Litman Gregory Masters or generate 0.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Term Income Fund vs. Litman Gregory Masters
Performance |
| Timeline |
| Short Term Income |
| Litman Gregory Masters |
Short-term Income and Litman Gregory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short-term Income and Litman Gregory
The main advantage of trading using opposite Short-term Income and Litman Gregory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short-term Income position performs unexpectedly, Litman Gregory 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 Litman Gregory will offset losses from the drop in Litman Gregory's long position.| Short-term Income vs. Prudential Government Money | Short-term Income vs. First American Funds | Short-term Income vs. Transamerica Funds | Short-term Income vs. General Money Market |
| Litman Gregory vs. Pimco Short Asset | Litman Gregory vs. Doubleline Low Duration | Litman Gregory vs. Palmer Square Ssi | Litman Gregory vs. Short Term Income 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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