Correlation Between Intermediate-term and Target Retirement
Can any of the company-specific risk be diversified away by investing in both Intermediate-term and Target Retirement 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 Intermediate-term and Target Retirement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intermediate Term Bond Fund and Target Retirement 2030, you can compare the effects of market volatilities on Intermediate-term and Target Retirement 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 Intermediate-term with a short position of Target Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate-term and Target Retirement.
Diversification Opportunities for Intermediate-term and Target Retirement
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Intermediate-term and Target is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Bond Fund and Target Retirement 2030 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Retirement 2030 and Intermediate-term 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 Intermediate Term Bond Fund are associated (or correlated) with Target Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Retirement 2030 has no effect on the direction of Intermediate-term i.e., Intermediate-term and Target Retirement go up and down completely randomly.
Pair Corralation between Intermediate-term and Target Retirement
Assuming the 90 days horizon Intermediate-term is expected to generate 2.31 times less return on investment than Target Retirement. But when comparing it to its historical volatility, Intermediate Term Bond Fund is 1.31 times less risky than Target Retirement. It trades about 0.06 of its potential returns per unit of risk. Target Retirement 2030 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,108 in Target Retirement 2030 on September 1, 2024 and sell it today you would earn a total of 211.00 from holding Target Retirement 2030 or generate 19.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Intermediate Term Bond Fund vs. Target Retirement 2030
Performance |
| Timeline |
| Intermediate Term Bond |
| Target Retirement 2030 |
Intermediate-term and Target Retirement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intermediate-term and Target Retirement
The main advantage of trading using opposite Intermediate-term and Target Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate-term position performs unexpectedly, Target Retirement 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 Target Retirement will offset losses from the drop in Target Retirement's long position.| Intermediate-term vs. Thrivent Income Fund | Intermediate-term vs. T Rowe Price | Intermediate-term vs. Maryland Tax Free Bond | Intermediate-term vs. T Rowe Price |
| Target Retirement vs. Vanguard Target Retirement | Target Retirement vs. American Funds 2030 | Target Retirement vs. American Funds 2030 | Target Retirement vs. Fidelity Freedom 2030 |
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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