Correlation Between Power Dividend and Bright Rock
Can any of the company-specific risk be diversified away by investing in both Power Dividend and Bright Rock 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 Power Dividend and Bright Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Dividend Index and Bright Rock Quality, you can compare the effects of market volatilities on Power Dividend and Bright Rock 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 Power Dividend with a short position of Bright Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Dividend and Bright Rock.
Diversification Opportunities for Power Dividend and Bright Rock
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Power and Bright is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Power Dividend Index and Bright Rock Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Rock Quality and Power Dividend 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 Power Dividend Index are associated (or correlated) with Bright Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Rock Quality has no effect on the direction of Power Dividend i.e., Power Dividend and Bright Rock go up and down completely randomly.
Pair Corralation between Power Dividend and Bright Rock
Assuming the 90 days horizon Power Dividend Index is expected to generate 1.38 times more return on investment than Bright Rock. However, Power Dividend is 1.38 times more volatile than Bright Rock Quality. It trades about 0.31 of its potential returns per unit of risk. Bright Rock Quality is currently generating about 0.35 per unit of risk. If you would invest 925.00 in Power Dividend Index on November 3, 2024 and sell it today you would earn a total of 50.00 from holding Power Dividend Index or generate 5.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power Dividend Index vs. Bright Rock Quality
Performance |
| Timeline |
| Power Dividend Index |
| Bright Rock Quality |
Power Dividend and Bright Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Dividend and Bright Rock
The main advantage of trading using opposite Power Dividend and Bright Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Dividend position performs unexpectedly, Bright Rock 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 Bright Rock will offset losses from the drop in Bright Rock's long position.| Power Dividend vs. Power Income Fund | Power Dividend vs. Power Income Fund | Power Dividend vs. Power Income Fund | Power Dividend vs. Power Momentum Index |
| Bright Rock vs. Dodge Cox Stock | Bright Rock vs. Guidemark Large Cap | Bright Rock vs. Qs Large Cap | Bright Rock vs. Oakmark Fund Investor |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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