Correlation Between At Equity and At Income

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

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

Diversification Opportunities for At Equity and At Income

0.9

Correlation Coefficient

At Equity  At Income

Almost no diversification

The 3 months correlation between AWYIX and AWIIX is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding At Equity Income and At Income Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on At Income Opportunities and At Equity 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 At Equity Income are associated (or correlated) with At Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of At Income Opportunities has no effect on the direction of At Equity i.e., At Equity and At Income go up and down completely randomly.

Pair Corralation between At Equity and At Income

Assuming the 90 days horizon At Equity Income is expected to generate 1.69 times more return on investment than At Income. However, At Equity is 1.69 times more volatile than At Income Opportunities. It trades about 0.47 of its potential returns per unit of risk. At Income Opportunities is currently generating about 0.42 per unit of risk. If you would invest  6,282  in At Equity Income on September 2, 2024 and sell it today you would earn a total of  419.00  from holding At Equity Income or generate 6.67% return on investment over 90 days.

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

At Equity Income  vs.  At Income Opportunities

At Equity Income

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in At Equity Income are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, At Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

At Income Opportunities

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in At Income Opportunities are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, At Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with At Equity and At Income

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

The idea behind At Equity Income and At Income Opportunities 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.