Correlation Between Strategic Allocation and One Choice
Can any of the company-specific risk be diversified away by investing in both Strategic Allocation 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 Strategic Allocation and One Choice into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Allocation Servative and One Choice Portfolio, you can compare the effects of market volatilities on Strategic Allocation 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 Strategic Allocation with a short position of One Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Allocation and One Choice.
Diversification Opportunities for Strategic Allocation and One Choice
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Strategic and One is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Servative and One Choice Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Choice Portfolio and Strategic Allocation 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 Strategic Allocation Servative 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 Portfolio has no effect on the direction of Strategic Allocation i.e., Strategic Allocation and One Choice go up and down completely randomly.
Pair Corralation between Strategic Allocation and One Choice
Assuming the 90 days horizon Strategic Allocation is expected to generate 1.07 times less return on investment than One Choice. But when comparing it to its historical volatility, Strategic Allocation Servative is 1.2 times less risky than One Choice. It trades about 0.43 of its potential returns per unit of risk. One Choice Portfolio is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 1,538 in One Choice Portfolio on September 1, 2024 and sell it today you would earn a total of 52.00 from holding One Choice Portfolio or generate 3.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Allocation Servative vs. One Choice Portfolio
Performance |
| Timeline |
| Strategic Allocation |
| One Choice Portfolio |
Strategic Allocation and One Choice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Allocation and One Choice
The main advantage of trading using opposite Strategic Allocation and One Choice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Allocation 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.The idea behind Strategic Allocation Servative and One Choice Portfolio 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.
| One Choice vs. One Choice Portfolio | One Choice vs. One Choice Portfolio | One Choice vs. One Choice Portfolio | One Choice vs. One Choice Portfolio |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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