Correlation Between Rational Dividend and Swan Defined

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

By analyzing existing cross correlation between Rational Dividend Capture and Swan Defined Risk, you can compare the effects of market volatilities on Rational Dividend and Swan Defined 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 Rational Dividend with a short position of Swan Defined. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Dividend and Swan Defined.

Diversification Opportunities for Rational Dividend and Swan Defined

0.71

Correlation Coefficient

Rational Dividend  Swan Defined

Poor diversification

The 3 months correlation between Rational and Swan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Rational Dividend Capture and Swan Defined Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swan Defined Risk and Rational Dividend 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 Rational Dividend Capture are associated (or correlated) with Swan Defined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swan Defined Risk has no effect on the direction of Rational Dividend i.e., Rational Dividend and Swan Defined go up and down completely randomly.

Pair Corralation between Rational Dividend and Swan Defined

Assuming the 90 days horizon Rational Dividend Capture is expected to generate 0.69 times more return on investment than Swan Defined. However, Rational Dividend Capture is 1.45 times less risky than Swan Defined. It trades about -0.15 of its potential returns per unit of risk. Swan Defined Risk is currently generating about -0.23 per unit of risk. If you would invest  972.00  in Rational Dividend Capture on October 12, 2024 and sell it today you would lose (20.00) from holding Rational Dividend Capture or give up 2.06% of portfolio value over 90 days.

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

Rational Dividend Capture  vs.  Swan Defined Risk

Rational Dividend Capture

Risk-Adjusted Performance

0 of 100

Weak

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

Swan Defined Risk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Rational Dividend and Swan Defined

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

The idea behind Rational Dividend Capture and Swan Defined Risk 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.