Correlation Between Dynamic Allocation and Asset Allocation
Can any of the company-specific risk be diversified away by investing in both Dynamic Allocation and Asset Allocation 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 Dynamic Allocation and Asset Allocation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dynamic Allocation Fund and Asset Allocation Fund, you can compare the effects of market volatilities on Dynamic Allocation and Asset Allocation 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 Dynamic Allocation with a short position of Asset Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynamic Allocation and Asset Allocation.
Diversification Opportunities for Dynamic Allocation and Asset Allocation
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dynamic and Asset is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Allocation Fund and Asset Allocation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asset Allocation and Dynamic Allocation 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 Dynamic Allocation Fund are associated (or correlated) with Asset Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asset Allocation has no effect on the direction of Dynamic Allocation i.e., Dynamic Allocation and Asset Allocation go up and down completely randomly.
Pair Corralation between Dynamic Allocation and Asset Allocation
Assuming the 90 days horizon Dynamic Allocation Fund is expected to generate 0.94 times more return on investment than Asset Allocation. However, Dynamic Allocation Fund is 1.07 times less risky than Asset Allocation. It trades about 0.12 of its potential returns per unit of risk. Asset Allocation Fund is currently generating about 0.09 per unit of risk. If you would invest 1,062 in Dynamic Allocation Fund on August 27, 2024 and sell it today you would earn a total of 14.00 from holding Dynamic Allocation Fund or generate 1.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dynamic Allocation Fund vs. Asset Allocation Fund
Performance |
| Timeline |
| Dynamic Allocation |
| Asset Allocation |
Dynamic Allocation and Asset Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dynamic Allocation and Asset Allocation
The main advantage of trading using opposite Dynamic Allocation and Asset Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynamic Allocation position performs unexpectedly, Asset Allocation 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 Asset Allocation will offset losses from the drop in Asset Allocation's long position.| Dynamic Allocation vs. Mid Cap Index | Dynamic Allocation vs. Mid Cap Strategic | Dynamic Allocation vs. Valic Company I | Dynamic Allocation vs. Valic Company I |
| Asset Allocation vs. Mid Cap Index | Asset Allocation vs. Mid Cap Strategic | Asset Allocation vs. Valic Company I | Asset Allocation vs. Valic Company I |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |