Correlation Between Floating Rate and Via Renewables

Can any of the company-specific risk be diversified away by investing in both Floating Rate and Via Renewables 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 Floating Rate and Via Renewables into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Floating Rate Fund and Via Renewables, you can compare the effects of market volatilities on Floating Rate and Via Renewables 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 Floating Rate with a short position of Via Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of Floating Rate and Via Renewables.

Diversification Opportunities for Floating Rate and Via Renewables

0.73

Correlation Coefficient

Floating Rate  Via Renewables

Poor diversification

The 3 months correlation between Floating and Via is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Floating Rate Fund and Via Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Via Renewables and Floating Rate 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 Floating Rate Fund are associated (or correlated) with Via Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Via Renewables has no effect on the direction of Floating Rate i.e., Floating Rate and Via Renewables go up and down completely randomly.

Pair Corralation between Floating Rate and Via Renewables

Assuming the 90 days horizon Floating Rate is expected to generate 19.39 times less return on investment than Via Renewables. But when comparing it to its historical volatility, Floating Rate Fund is 8.84 times less risky than Via Renewables. It trades about 0.13 of its potential returns per unit of risk. Via Renewables is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  2,011  in Via Renewables on October 8, 2024 and sell it today you would earn a total of  304.00  from holding Via Renewables or generate 15.12% return on investment over 90 days.

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

Floating Rate Fund  vs.  Via Renewables

Floating Rate

Risk-Adjusted Performance

10 of 100

OK

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

Via Renewables

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Via Renewables reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Floating Rate and Via Renewables

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

The idea behind Floating Rate Fund and Via Renewables 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.