Correlation Between Index Plus and Fixed Income
Can any of the company-specific risk be diversified away by investing in both Index Plus and Fixed Income 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 Index Plus and Fixed Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Index Plus Largecap and The Fixed Income, you can compare the effects of market volatilities on Index Plus and Fixed Income 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 Index Plus with a short position of Fixed Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Index Plus and Fixed Income.
Diversification Opportunities for Index Plus and Fixed Income
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Index and Fixed is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Index Plus Largecap and The Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fixed Income and Index Plus 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 Index Plus Largecap are associated (or correlated) with Fixed Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fixed Income has no effect on the direction of Index Plus i.e., Index Plus and Fixed Income go up and down completely randomly.
Pair Corralation between Index Plus and Fixed Income
Assuming the 90 days horizon Index Plus is expected to generate 1.42 times less return on investment than Fixed Income. In addition to that, Index Plus is 2.67 times more volatile than The Fixed Income. It trades about 0.09 of its total potential returns per unit of risk. The Fixed Income is currently generating about 0.34 per unit of volatility. If you would invest 735.00 in The Fixed Income on September 12, 2024 and sell it today you would earn a total of 10.00 from holding The Fixed Income or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Index Plus Largecap vs. The Fixed Income
Performance |
| Timeline |
| Index Plus Largecap |
| Fixed Income |
Index Plus and Fixed Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Index Plus and Fixed Income
The main advantage of trading using opposite Index Plus and Fixed Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Index Plus position performs unexpectedly, Fixed Income 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 Fixed Income will offset losses from the drop in Fixed Income's long position.| Index Plus vs. Us Vector Equity | Index Plus vs. Artisan Select Equity | Index Plus vs. Us Strategic Equity | Index Plus vs. Locorr Dynamic Equity |
| Fixed Income vs. Goldman Sachs Government | Fixed Income vs. Davis Government Bond | Fixed Income vs. Inverse Government Long | Fixed Income vs. Schwab Government Money |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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