Correlation Between Tech Leaders and Bloom Select
Can any of the company-specific risk be diversified away by investing in both Tech Leaders and Bloom Select 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 Tech Leaders and Bloom Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tech Leaders Income and Bloom Select Income, you can compare the effects of market volatilities on Tech Leaders and Bloom Select 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 Tech Leaders with a short position of Bloom Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tech Leaders and Bloom Select.
Diversification Opportunities for Tech Leaders and Bloom Select
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tech and Bloom is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Tech Leaders Income and Bloom Select Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bloom Select Income and Tech Leaders 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 Tech Leaders Income are associated (or correlated) with Bloom Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bloom Select Income has no effect on the direction of Tech Leaders i.e., Tech Leaders and Bloom Select go up and down completely randomly.
Pair Corralation between Tech Leaders and Bloom Select
Assuming the 90 days trading horizon Tech Leaders Income is expected to generate 1.42 times more return on investment than Bloom Select. However, Tech Leaders is 1.42 times more volatile than Bloom Select Income. It trades about 0.11 of its potential returns per unit of risk. Bloom Select Income is currently generating about 0.03 per unit of risk. If you would invest 1,431 in Tech Leaders Income on August 31, 2024 and sell it today you would earn a total of 1,084 from holding Tech Leaders Income or generate 75.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.69% |
| Values | Daily Returns |
Tech Leaders Income vs. Bloom Select Income
Performance |
| Timeline |
| Tech Leaders Income |
| Bloom Select Income |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Tech Leaders and Bloom Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tech Leaders and Bloom Select
The main advantage of trading using opposite Tech Leaders and Bloom Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tech Leaders position performs unexpectedly, Bloom Select 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 Bloom Select will offset losses from the drop in Bloom Select's long position.| Tech Leaders vs. iShares Canadian HYBrid | Tech Leaders vs. Brompton European Dividend | Tech Leaders vs. Solar Alliance Energy | Tech Leaders vs. PHN Multi Style All Cap |
| Bloom Select vs. Tech Leaders Income | Bloom Select vs. Brompton Global Dividend | Bloom Select vs. Forstrong Global Income | Bloom Select vs. iShares Canadian HYBrid |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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