Correlation Between Fixed Income and Stone Ridge

Can any of the company-specific risk be diversified away by investing in both Fixed Income and Stone Ridge 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 Stone Ridge 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 Stone Ridge High, you can compare the effects of market volatilities on Fixed Income and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fixed Income and Stone Ridge.

Diversification Opportunities for Fixed Income and Stone Ridge

-0.24

Correlation Coefficient

Fixed Income  Stone Ridge

Very good diversification

The 3 months correlation between Fixed and Stone is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Fixed Income Shares and Stone Ridge High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge High 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 Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge High has no effect on the direction of Fixed Income i.e., Fixed Income and Stone Ridge go up and down completely randomly.

Pair Corralation between Fixed Income and Stone Ridge

Assuming the 90 days horizon Fixed Income Shares is expected to generate 1.14 times more return on investment than Stone Ridge. However, Fixed Income is 1.14 times more volatile than Stone Ridge High. It trades about 0.14 of its potential returns per unit of risk. Stone Ridge High is currently generating about -0.09 per unit of risk. If you would invest  875.00  in Fixed Income Shares on December 29, 2024 and sell it today you would earn a total of  26.00  from holding Fixed Income Shares or generate 2.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Fixed Income Shares  vs.  Stone Ridge High

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 11 (%) 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.

Stone Ridge High

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stone Ridge High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Stone Ridge 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 Stone Ridge

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

The idea behind Fixed Income Shares and Stone Ridge High 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.