Correlation Between Investment Quality and Salient Alternative
Can any of the company-specific risk be diversified away by investing in both Investment Quality and Salient Alternative 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 Investment Quality and Salient Alternative into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Investment Quality Bond and Salient Alternative Beta, you can compare the effects of market volatilities on Investment Quality and Salient Alternative 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 Investment Quality with a short position of Salient Alternative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment Quality and Salient Alternative.
Diversification Opportunities for Investment Quality and Salient Alternative
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Investment and Salient is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Investment Quality Bond and Salient Alternative Beta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salient Alternative Beta and Investment Quality 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 Investment Quality Bond are associated (or correlated) with Salient Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salient Alternative Beta has no effect on the direction of Investment Quality i.e., Investment Quality and Salient Alternative go up and down completely randomly.
Pair Corralation between Investment Quality and Salient Alternative
Assuming the 90 days horizon Investment Quality is expected to generate 7.37 times less return on investment than Salient Alternative. But when comparing it to its historical volatility, Investment Quality Bond is 2.18 times less risky than Salient Alternative. It trades about 0.1 of its potential returns per unit of risk. Salient Alternative Beta is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 1,191 in Salient Alternative Beta on September 1, 2024 and sell it today you would earn a total of 56.00 from holding Salient Alternative Beta or generate 4.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Investment Quality Bond vs. Salient Alternative Beta
Performance |
| Timeline |
| Investment Quality Bond |
| Salient Alternative Beta |
Investment Quality and Salient Alternative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investment Quality and Salient Alternative
The main advantage of trading using opposite Investment Quality and Salient Alternative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment Quality position performs unexpectedly, Salient Alternative 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 Salient Alternative will offset losses from the drop in Salient Alternative's long position.| Investment Quality vs. Ab Bond Inflation | Investment Quality vs. Blrc Sgy Mnp | Investment Quality vs. Bbh Intermediate Municipal | Investment Quality vs. Versatile Bond Portfolio |
| Salient Alternative vs. Salient Alternative Beta | Salient Alternative vs. Moderately Aggressive Balanced | Salient Alternative vs. Salient Mlp Fund | Salient Alternative vs. Moderately Aggressive Balanced |
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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