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
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Investment and Salient is -0.74. 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 8.29 times less return on investment than Salient Alternative. But when comparing it to its historical volatility, Investment Quality Bond is 2.38 times less risky than Salient Alternative. It trades about 0.03 of its potential returns per unit of risk. Salient Alternative Beta is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,005 in Salient Alternative Beta on August 31, 2024 and sell it today you would earn a total of 242.00 from holding Salient Alternative Beta or generate 24.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| 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.The idea behind Investment Quality Bond and Salient Alternative Beta pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Salient Alternative vs. American Funds The | Salient Alternative vs. Income Fund Of | Salient Alternative vs. Income Fund Of | Salient Alternative vs. Income Fund Of |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA |