Correlation Between Moderate Balanced and The Bond
Can any of the company-specific risk be diversified away by investing in both Moderate Balanced and The Bond 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 Moderate Balanced and The Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Moderate Balanced Allocation and The Bond Fund, you can compare the effects of market volatilities on Moderate Balanced and The Bond 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 Moderate Balanced with a short position of The Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderate Balanced and The Bond.
Diversification Opportunities for Moderate Balanced and The Bond
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MODERATE and The is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Moderate Balanced Allocation and The Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bond Fund and Moderate Balanced 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 Moderate Balanced Allocation are associated (or correlated) with The Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bond Fund has no effect on the direction of Moderate Balanced i.e., Moderate Balanced and The Bond go up and down completely randomly.
Pair Corralation between Moderate Balanced and The Bond
Assuming the 90 days horizon Moderate Balanced Allocation is expected to generate 1.94 times more return on investment than The Bond. However, Moderate Balanced is 1.94 times more volatile than The Bond Fund. It trades about 0.2 of its potential returns per unit of risk. The Bond Fund is currently generating about 0.07 per unit of risk. If you would invest 1,178 in Moderate Balanced Allocation on October 24, 2024 and sell it today you would earn a total of 26.00 from holding Moderate Balanced Allocation or generate 2.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Moderate Balanced Allocation vs. The Bond Fund
Performance |
| Timeline |
| Moderate Balanced |
| Bond Fund |
Moderate Balanced and The Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Moderate Balanced and The Bond
The main advantage of trading using opposite Moderate Balanced and The Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moderate Balanced position performs unexpectedly, The Bond 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 The Bond will offset losses from the drop in The Bond's long position.| Moderate Balanced vs. Americafirst Monthly Risk On | Moderate Balanced vs. Virtus High Yield | Moderate Balanced vs. Aggressive Balanced Allocation | Moderate Balanced vs. Ab High Income |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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