Correlation Between Extended Market and Spectrum Advisors
Can any of the company-specific risk be diversified away by investing in both Extended Market and Spectrum Advisors 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 Extended Market and Spectrum Advisors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Spectrum Advisors Preferred, you can compare the effects of market volatilities on Extended Market and Spectrum Advisors 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 Extended Market with a short position of Spectrum Advisors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Spectrum Advisors.
Diversification Opportunities for Extended Market and Spectrum Advisors
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Extended and Spectrum is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Spectrum Advisors Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Advisors and Extended Market 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 Extended Market Index are associated (or correlated) with Spectrum Advisors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Advisors has no effect on the direction of Extended Market i.e., Extended Market and Spectrum Advisors go up and down completely randomly.
Pair Corralation between Extended Market and Spectrum Advisors
Assuming the 90 days horizon Extended Market is expected to generate 1.07 times less return on investment than Spectrum Advisors. In addition to that, Extended Market is 1.74 times more volatile than Spectrum Advisors Preferred. It trades about 0.02 of its total potential returns per unit of risk. Spectrum Advisors Preferred is currently generating about 0.04 per unit of volatility. If you would invest 1,727 in Spectrum Advisors Preferred on November 3, 2024 and sell it today you would earn a total of 67.00 from holding Spectrum Advisors Preferred or generate 3.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Spectrum Advisors Preferred
Performance |
| Timeline |
| Extended Market Index |
| Spectrum Advisors |
Extended Market and Spectrum Advisors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Spectrum Advisors
The main advantage of trading using opposite Extended Market and Spectrum Advisors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market position performs unexpectedly, Spectrum Advisors 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 Spectrum Advisors will offset losses from the drop in Spectrum Advisors' long position.| Extended Market vs. Franklin Low Duration | Extended Market vs. Mndvux | Extended Market vs. Voya Global Equity | Extended Market vs. Legg Mason Bw |
| Spectrum Advisors vs. Gabelli Convertible And | Spectrum Advisors vs. Rationalpier 88 Convertible | Spectrum Advisors vs. Absolute Convertible Arbitrage | Spectrum Advisors vs. Lord Abbett Convertible |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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