Correlation Between Retirement Living and Core Bond

Can any of the company-specific risk be diversified away by investing in both Retirement Living and Core Bond 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 Retirement Living and Core Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Retirement Living Through and Core Bond Fund, you can compare the effects of market volatilities on Retirement Living and Core Bond 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 Retirement Living with a short position of Core Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retirement Living and Core Bond.

Diversification Opportunities for Retirement Living and Core Bond

0.72

Correlation Coefficient

Retirement Living  Core Bond

Poor diversification

The 3 months correlation between Retirement and Core is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Retirement Living Through and Core Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Bond Fund and Retirement Living 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 Retirement Living Through are associated (or correlated) with Core Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Bond Fund has no effect on the direction of Retirement Living i.e., Retirement Living and Core Bond go up and down completely randomly.

Pair Corralation between Retirement Living and Core Bond

Assuming the 90 days horizon Retirement Living Through is expected to generate 0.92 times more return on investment than Core Bond. However, Retirement Living Through is 1.09 times less risky than Core Bond. It trades about -0.09 of its potential returns per unit of risk. Core Bond Fund is currently generating about -0.21 per unit of risk. If you would invest  1,082  in Retirement Living Through on September 22, 2024 and sell it today you would lose (21.00) from holding Retirement Living Through or give up 1.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Retirement Living Through  vs.  Core Bond Fund

Retirement Living Through

Risk-Adjusted Performance

0 of 100

Very Weak

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

Core Bond Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Retirement Living and Core Bond

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

The idea behind Retirement Living Through and Core Bond Fund 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.