Correlation Between Fixed Income and Sarofim Equity

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

By analyzing existing cross correlation between The Fixed Income and Sarofim Equity, you can compare the effects of market volatilities on Fixed Income and Sarofim Equity 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 Sarofim Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fixed Income and Sarofim Equity.

Diversification Opportunities for Fixed Income and Sarofim Equity

0.15

Correlation Coefficient

Fixed Income  Sarofim Equity

Average diversification

The 3 months correlation between Fixed and Sarofim is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding The Fixed Income and Sarofim Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarofim Equity 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 The Fixed Income are associated (or correlated) with Sarofim Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarofim Equity has no effect on the direction of Fixed Income i.e., Fixed Income and Sarofim Equity go up and down completely randomly.

Pair Corralation between Fixed Income and Sarofim Equity

Assuming the 90 days horizon The Fixed Income is expected to generate 0.34 times more return on investment than Sarofim Equity. However, The Fixed Income is 2.94 times less risky than Sarofim Equity. It trades about 0.0 of its potential returns per unit of risk. Sarofim Equity is currently generating about -0.03 per unit of risk. If you would invest  730.00  in The Fixed Income on December 28, 2024 and sell it today you would earn a total of  0.00  from holding The Fixed Income or generate 0.0% return on investment over 90 days.

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

The Fixed Income  vs.  Sarofim Equity

Fixed Income

Risk-Adjusted Performance

Very Weak

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

Sarofim Equity

Risk-Adjusted Performance

Very Weak

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

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

The idea behind The Fixed Income and Sarofim Equity 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.