Correlation Between Value Fund and One Choice
Can any of the company-specific risk be diversified away by investing in both Value Fund and One Choice 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 Value Fund and One Choice into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Value Fund A and One Choice 2050, you can compare the effects of market volatilities on Value Fund and One Choice 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 Value Fund with a short position of One Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and One Choice.
Diversification Opportunities for Value Fund and One Choice
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Value and One is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund A and One Choice 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Choice 2050 and Value Fund 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 Value Fund A are associated (or correlated) with One Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Choice 2050 has no effect on the direction of Value Fund i.e., Value Fund and One Choice go up and down completely randomly.
Pair Corralation between Value Fund and One Choice
Assuming the 90 days horizon Value Fund A is expected to generate 1.15 times more return on investment than One Choice. However, Value Fund is 1.15 times more volatile than One Choice 2050. It trades about 0.09 of its potential returns per unit of risk. One Choice 2050 is currently generating about 0.1 per unit of risk. If you would invest 807.00 in Value Fund A on September 3, 2024 and sell it today you would earn a total of 83.00 from holding Value Fund A or generate 10.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Value Fund A vs. One Choice 2050
Performance |
| Timeline |
| Value Fund A |
| One Choice 2050 |
Value Fund and One Choice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Fund and One Choice
The main advantage of trading using opposite Value Fund and One Choice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund position performs unexpectedly, One Choice 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 One Choice will offset losses from the drop in One Choice's long position.| Value Fund vs. Western Asset High | Value Fund vs. Metropolitan West High | Value Fund vs. Siit High Yield | Value Fund vs. Pace High Yield |
| One Choice vs. Vanguard Target Retirement | One Choice vs. American Funds 2050 | One Choice vs. American Funds 2050 | One Choice vs. American Funds 2050 |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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