Correlation Between Aptus Collared and Absolute Core

Can any of the company-specific risk be diversified away by investing in both Aptus Collared and Absolute Core 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 Aptus Collared and Absolute Core into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aptus Collared Income and Absolute Core Strategy, you can compare the effects of market volatilities on Aptus Collared and Absolute Core 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 Aptus Collared with a short position of Absolute Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptus Collared and Absolute Core.

Diversification Opportunities for Aptus Collared and Absolute Core

0.55

Correlation Coefficient

Aptus Collared  Absolute Core

Very weak diversification

The 3 months correlation between Aptus and Absolute is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Aptus Collared Income and Absolute Core Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Core Strategy and Aptus Collared 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 Aptus Collared Income are associated (or correlated) with Absolute Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Core Strategy has no effect on the direction of Aptus Collared i.e., Aptus Collared and Absolute Core go up and down completely randomly.

Pair Corralation between Aptus Collared and Absolute Core

Given the investment horizon of 90 days Aptus Collared Income is expected to under-perform the Absolute Core. In addition to that, Aptus Collared is 1.06 times more volatile than Absolute Core Strategy. It trades about -0.04 of its total potential returns per unit of risk. Absolute Core Strategy is currently generating about 0.05 per unit of volatility. If you would invest  3,283  in Absolute Core Strategy on December 2, 2024 and sell it today you would earn a total of  53.00  from holding Absolute Core Strategy or generate 1.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Aptus Collared Income  vs.  Absolute Core Strategy

Aptus Collared Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aptus Collared Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Aptus Collared is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Absolute Core Strategy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Core Strategy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Absolute Core is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Aptus Collared and Absolute Core

The main advantage of trading using opposite Aptus Collared and Absolute Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aptus Collared position performs unexpectedly, Absolute Core 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 Absolute Core will offset losses from the drop in Absolute Core's long position.

The idea behind Aptus Collared Income and Absolute Core Strategy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.