Correlation Between Extended Market and Towpath Focus
Can any of the company-specific risk be diversified away by investing in both Extended Market and Towpath Focus 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 Towpath Focus 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 Towpath Focus, you can compare the effects of market volatilities on Extended Market and Towpath Focus 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 Towpath Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Towpath Focus.
Diversification Opportunities for Extended Market and Towpath Focus
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between EXTENDED and Towpath is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Towpath Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Towpath Focus 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 Towpath Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Towpath Focus has no effect on the direction of Extended Market i.e., Extended Market and Towpath Focus go up and down completely randomly.
Pair Corralation between Extended Market and Towpath Focus
Assuming the 90 days horizon Extended Market Index is expected to generate 1.91 times more return on investment than Towpath Focus. However, Extended Market is 1.91 times more volatile than Towpath Focus. It trades about 0.35 of its potential returns per unit of risk. Towpath Focus is currently generating about 0.27 per unit of risk. If you would invest 2,291 in Extended Market Index on September 1, 2024 and sell it today you would earn a total of 228.00 from holding Extended Market Index or generate 9.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Towpath Focus
Performance |
| Timeline |
| Extended Market Index |
| Towpath Focus |
Extended Market and Towpath Focus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Towpath Focus
The main advantage of trading using opposite Extended Market and Towpath Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market position performs unexpectedly, Towpath Focus 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 Towpath Focus will offset losses from the drop in Towpath Focus' long position.| Extended Market vs. American Century High | Extended Market vs. Metropolitan West High | Extended Market vs. Pace High Yield | Extended Market vs. Dunham High Yield |
| Towpath Focus vs. Towpath Technology | Towpath Focus vs. Pimco Income Strategy | Towpath Focus vs. Growth Fund Of | Towpath Focus vs. Westwood Largecap Value |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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