Correlation Between Power Dividend and Cutler Equity
Can any of the company-specific risk be diversified away by investing in both Power Dividend and Cutler Equity 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 Cutler Equity 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 Cutler Equity, you can compare the effects of market volatilities on Power Dividend and Cutler Equity 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 Cutler Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Dividend and Cutler Equity.
Diversification Opportunities for Power Dividend and Cutler Equity
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Power and Cutler is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Power Dividend Index and Cutler Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cutler Equity 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 Cutler Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cutler Equity has no effect on the direction of Power Dividend i.e., Power Dividend and Cutler Equity go up and down completely randomly.
Pair Corralation between Power Dividend and Cutler Equity
Assuming the 90 days horizon Power Dividend Index is expected to under-perform the Cutler Equity. In addition to that, Power Dividend is 1.16 times more volatile than Cutler Equity. It trades about -0.14 of its total potential returns per unit of risk. Cutler Equity is currently generating about -0.1 per unit of volatility. If you would invest 2,645 in Cutler Equity on January 11, 2025 and sell it today you would lose (131.00) from holding Cutler Equity or give up 4.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Power Dividend Index vs. Cutler Equity
Performance |
| Timeline |
| Power Dividend Index |
| Cutler Equity |
Power Dividend and Cutler Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Dividend and Cutler Equity
The main advantage of trading using opposite Power Dividend and Cutler Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Dividend position performs unexpectedly, Cutler Equity 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 Cutler Equity will offset losses from the drop in Cutler Equity's long position.| Power Dividend vs. Power Income Fund | Power Dividend vs. Power Income Fund | Power Dividend vs. Power Momentum Index | Power Dividend vs. Power Momentum Index |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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