Correlation Between Strategic Bond and Equity Growth
Can any of the company-specific risk be diversified away by investing in both Strategic Bond and Equity Growth 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 Strategic Bond and Equity Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Bond Fund and Equity Growth Strategy, you can compare the effects of market volatilities on Strategic Bond and Equity Growth 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 Strategic Bond with a short position of Equity Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Bond and Equity Growth.
Diversification Opportunities for Strategic Bond and Equity Growth
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Strategic and Equity is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Bond Fund and Equity Growth Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Growth Strategy and Strategic 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 Strategic Bond Fund are associated (or correlated) with Equity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Growth Strategy has no effect on the direction of Strategic Bond i.e., Strategic Bond and Equity Growth go up and down completely randomly.
Pair Corralation between Strategic Bond and Equity Growth
Assuming the 90 days horizon Strategic Bond is expected to generate 5.58 times less return on investment than Equity Growth. But when comparing it to its historical volatility, Strategic Bond Fund is 1.74 times less risky than Equity Growth. It trades about 0.02 of its potential returns per unit of risk. Equity Growth Strategy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,220 in Equity Growth Strategy on August 29, 2024 and sell it today you would earn a total of 389.00 from holding Equity Growth Strategy or generate 31.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Bond Fund vs. Equity Growth Strategy
Performance |
| Timeline |
| Strategic Bond |
| Equity Growth Strategy |
Strategic Bond and Equity Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Bond and Equity Growth
The main advantage of trading using opposite Strategic Bond and Equity Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Bond position performs unexpectedly, Equity Growth 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 Equity Growth will offset losses from the drop in Equity Growth's long position.| Strategic Bond vs. Leggmason Partners Institutional | Strategic Bond vs. Materials Portfolio Fidelity | Strategic Bond vs. Arrow Managed Futures | Strategic Bond vs. Qs Large Cap |
| Equity Growth vs. International Developed Markets | Equity Growth vs. Global Real Estate | Equity Growth vs. Global Real Estate | Equity Growth vs. Global Real Estate |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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