Correlation Between Absolute Capital and Barings Us

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

By analyzing existing cross correlation between Absolute Capital Defender and Barings High Yield, you can compare the effects of market volatilities on Absolute Capital and Barings Us 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 Absolute Capital with a short position of Barings Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Capital and Barings Us.

Diversification Opportunities for Absolute Capital and Barings Us

0.36

Correlation Coefficient

Absolute Capital  Barings Us

Weak diversification

The 3 months correlation between Absolute and Barings is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Capital Defender and Barings High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings High Yield and Absolute Capital 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 Absolute Capital Defender are associated (or correlated) with Barings Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings High Yield has no effect on the direction of Absolute Capital i.e., Absolute Capital and Barings Us go up and down completely randomly.

Pair Corralation between Absolute Capital and Barings Us

Assuming the 90 days horizon Absolute Capital is expected to generate 1.04 times less return on investment than Barings Us. In addition to that, Absolute Capital is 1.66 times more volatile than Barings High Yield. It trades about 0.06 of its total potential returns per unit of risk. Barings High Yield is currently generating about 0.11 per unit of volatility. If you would invest  703.00  in Barings High Yield on October 24, 2024 and sell it today you would earn a total of  111.00  from holding Barings High Yield or generate 15.79% return on investment over 90 days.

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

Absolute Capital Defender  vs.  Barings High Yield

Absolute Capital Defender

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Capital Defender has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Absolute Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Barings High Yield

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barings High Yield are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Barings Us is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Absolute Capital and Barings Us

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

The idea behind Absolute Capital Defender and Barings High Yield 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.