Correlation Between Doubleline Emerging and Absolute Capital

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

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

Diversification Opportunities for Doubleline Emerging and Absolute Capital

0.37

Correlation Coefficient

Doubleline Emerging  Absolute Capital

Weak diversification

The 3 months correlation between Doubleline and Absolute is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Doubleline Emerging Markets and Absolute Capital Defender in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Defender and Doubleline Emerging 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 Doubleline Emerging Markets are associated (or correlated) with Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Defender has no effect on the direction of Doubleline Emerging i.e., Doubleline Emerging and Absolute Capital go up and down completely randomly.

Pair Corralation between Doubleline Emerging and Absolute Capital

Assuming the 90 days horizon Doubleline Emerging is expected to generate 4.64 times less return on investment than Absolute Capital. But when comparing it to its historical volatility, Doubleline Emerging Markets is 1.04 times less risky than Absolute Capital. It trades about 0.02 of its potential returns per unit of risk. Absolute Capital Defender is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  962.00  in Absolute Capital Defender on October 23, 2024 and sell it today you would earn a total of  159.00  from holding Absolute Capital Defender or generate 16.53% return on investment over 90 days.

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

Doubleline Emerging Markets  vs.  Absolute Capital Defender

Doubleline Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 forward indicators, Absolute Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Doubleline Emerging and Absolute Capital

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

The idea behind Doubleline Emerging Markets and Absolute Capital Defender 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.