Correlation Between Extended Market and Income Fund
Can any of the company-specific risk be diversified away by investing in both Extended Market and Income Fund 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 Income Fund 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 Income Fund Income, you can compare the effects of market volatilities on Extended Market and Income Fund 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 Income Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Income Fund.
Diversification Opportunities for Extended Market and Income Fund
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between EXTENDED and Income is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Income Fund Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund Income 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 Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund Income has no effect on the direction of Extended Market i.e., Extended Market and Income Fund go up and down completely randomly.
Pair Corralation between Extended Market and Income Fund
Assuming the 90 days horizon Extended Market Index is expected to generate 3.96 times more return on investment than Income Fund. However, Extended Market is 3.96 times more volatile than Income Fund Income. It trades about 0.27 of its potential returns per unit of risk. Income Fund Income is currently generating about 0.06 per unit of risk. If you would invest 2,325 in Extended Market Index on August 31, 2024 and sell it today you would earn a total of 188.00 from holding Extended Market Index or generate 8.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Income Fund Income
Performance |
| Timeline |
| Extended Market Index |
| Income Fund Income |
Extended Market and Income Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Income Fund
The main advantage of trading using opposite Extended Market and Income Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market position performs unexpectedly, Income Fund 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 Income Fund will offset losses from the drop in Income Fund's long position.| Extended Market vs. T Rowe Price | Extended Market vs. Morningstar Aggressive Growth | Extended Market vs. Ab Global Risk | Extended Market vs. Lgm Risk Managed |
| Income Fund vs. Shelton Emerging Markets | Income Fund vs. Western Asset Diversified | Income Fund vs. Vanguard Developed Markets | Income Fund vs. Harbor Diversified International |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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