Correlation Between New York and Target Retirement
Can any of the company-specific risk be diversified away by investing in both New York 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 New York and Target Retirement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New York Bond and Target Retirement 2060, you can compare the effects of market volatilities on New York 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 New York with a short position of Target Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of New York and Target Retirement.
Diversification Opportunities for New York and Target Retirement
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and Target is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding New York Bond and Target Retirement 2060 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Retirement 2060 and New York 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 New York Bond 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 2060 has no effect on the direction of New York i.e., New York and Target Retirement go up and down completely randomly.
Pair Corralation between New York and Target Retirement
Assuming the 90 days horizon New York is expected to generate 8.7 times less return on investment than Target Retirement. But when comparing it to its historical volatility, New York Bond is 1.6 times less risky than Target Retirement. It trades about 0.01 of its potential returns per unit of risk. Target Retirement 2060 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,193 in Target Retirement 2060 on September 1, 2024 and sell it today you would earn a total of 283.00 from holding Target Retirement 2060 or generate 23.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New York Bond vs. Target Retirement 2060
Performance |
| Timeline |
| New York Bond |
| Target Retirement 2060 |
New York and Target Retirement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New York and Target Retirement
The main advantage of trading using opposite New York and Target Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New York 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.| New York vs. Income Fund Income | New York vs. Usaa Nasdaq 100 | New York vs. Victory Diversified Stock | New York vs. Intermediate Term Bond Fund |
| Target Retirement vs. Income Fund Income | Target Retirement vs. Usaa Nasdaq 100 | Target Retirement vs. Victory Diversified Stock | Target Retirement vs. Intermediate Term Bond Fund |
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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