Correlation Between Strategic Bond and Select Equity
Can any of the company-specific risk be diversified away by investing in both Strategic Bond and Select 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 Strategic Bond and Select Equity 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 Select Equity Fund, you can compare the effects of market volatilities on Strategic Bond and Select 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 Strategic Bond with a short position of Select Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Bond and Select Equity.
Diversification Opportunities for Strategic Bond and Select Equity
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Strategic and Select is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Bond Fund and Select Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Equity 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 Select Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Equity has no effect on the direction of Strategic Bond i.e., Strategic Bond and Select Equity go up and down completely randomly.
Pair Corralation between Strategic Bond and Select Equity
Assuming the 90 days horizon Strategic Bond is expected to generate 8.06 times less return on investment than Select Equity. But when comparing it to its historical volatility, Strategic Bond Fund is 1.95 times less risky than Select Equity. It trades about 0.02 of its potential returns per unit of risk. Select Equity Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,359 in Select Equity Fund on August 25, 2024 and sell it today you would earn a total of 681.00 from holding Select Equity Fund or generate 50.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Bond Fund vs. Select Equity Fund
Performance |
| Timeline |
| Strategic Bond |
| Select Equity |
Strategic Bond and Select Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Bond and Select Equity
The main advantage of trading using opposite Strategic Bond and Select Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Bond position performs unexpectedly, Select 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 Select Equity will offset losses from the drop in Select Equity's long position.| Strategic Bond vs. Aqr Long Short Equity | Strategic Bond vs. Maryland Short Term Tax Free | Strategic Bond vs. Angel Oak Ultrashort | Strategic Bond vs. Guggenheim Long Short |
| Select Equity vs. Huber Capital Diversified | Select Equity vs. Evaluator Conservative Rms | Select Equity vs. Western Asset Diversified | Select Equity vs. American Funds Conservative |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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