Correlation Between Sierra Strategic and Absolute Convertible
Can any of the company-specific risk be diversified away by investing in both Sierra Strategic and Absolute Convertible 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 Sierra Strategic and Absolute Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sierra Strategic Income and Absolute Convertible Arbitrage, you can compare the effects of market volatilities on Sierra Strategic and Absolute Convertible 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 Sierra Strategic with a short position of Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra Strategic and Absolute Convertible.
Diversification Opportunities for Sierra Strategic and Absolute Convertible
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sierra and Absolute is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sierra Strategic Income and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible and Sierra Strategic 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 Sierra Strategic Income are associated (or correlated) with Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of Sierra Strategic i.e., Sierra Strategic and Absolute Convertible go up and down completely randomly.
Pair Corralation between Sierra Strategic and Absolute Convertible
Assuming the 90 days horizon Sierra Strategic is expected to generate 1.2 times less return on investment than Absolute Convertible. In addition to that, Sierra Strategic is 3.92 times more volatile than Absolute Convertible Arbitrage. It trades about 0.09 of its total potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about 0.44 per unit of volatility. If you would invest 1,048 in Absolute Convertible Arbitrage on September 2, 2024 and sell it today you would earn a total of 102.00 from holding Absolute Convertible Arbitrage or generate 9.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sierra Strategic Income vs. Absolute Convertible Arbitrage
Performance |
| Timeline |
| Sierra Strategic Income |
| Absolute Convertible |
Sierra Strategic and Absolute Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sierra Strategic and Absolute Convertible
The main advantage of trading using opposite Sierra Strategic and Absolute Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sierra Strategic position performs unexpectedly, Absolute Convertible 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 Absolute Convertible will offset losses from the drop in Absolute Convertible's long position.| Sierra Strategic vs. Sierra Tactical Risk | Sierra Strategic vs. Sierra Tactical Risk | Sierra Strategic vs. Sierra Tactical Risk | Sierra Strategic vs. Sierra Tactical Risk |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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