Correlation Between Fixed Income and Bats Series

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

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

Diversification Opportunities for Fixed Income and Bats Series

0.96

Correlation Coefficient

Fixed Income  Bats Series

Almost no diversification

The 3 months correlation between Fixed and Bats is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Fixed Income Shares and Bats Series M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bats Series M and Fixed Income 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 Fixed Income Shares are associated (or correlated) with Bats Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bats Series M has no effect on the direction of Fixed Income i.e., Fixed Income and Bats Series go up and down completely randomly.

Pair Corralation between Fixed Income and Bats Series

Assuming the 90 days horizon Fixed Income is expected to generate 1.05 times less return on investment than Bats Series. In addition to that, Fixed Income is 1.02 times more volatile than Bats Series M. It trades about 0.13 of its total potential returns per unit of risk. Bats Series M is currently generating about 0.14 per unit of volatility. If you would invest  815.00  in Bats Series M on December 28, 2024 and sell it today you would earn a total of  23.00  from holding Bats Series M or generate 2.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Fixed Income Shares  vs.  Bats Series M

Fixed Income Shares

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fixed Income Shares are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fixed Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bats Series M

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bats Series M are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Bats Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fixed Income and Bats Series

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

The idea behind Fixed Income Shares and Bats Series M 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.