Correlation Between Floating Rate and Ab Bond

Can any of the company-specific risk be diversified away by investing in both Floating Rate and Ab 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 Floating Rate and Ab Bond 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 Ab Bond Inflation, you can compare the effects of market volatilities on Floating Rate and Ab 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 Floating Rate with a short position of Ab Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Floating Rate and Ab Bond.

Diversification Opportunities for Floating Rate and Ab Bond

-0.63

Correlation Coefficient

Floating Rate  Ab Bond

Excellent diversification

The 3 months correlation between Floating and ABNTX is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Floating Rate Fund and Ab Bond Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Bond Inflation 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 Ab Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Bond Inflation has no effect on the direction of Floating Rate i.e., Floating Rate and Ab Bond go up and down completely randomly.

Pair Corralation between Floating Rate and Ab Bond

Assuming the 90 days horizon Floating Rate Fund is expected to generate 0.82 times more return on investment than Ab Bond. However, Floating Rate Fund is 1.22 times less risky than Ab Bond. It trades about 0.17 of its potential returns per unit of risk. Ab Bond Inflation is currently generating about 0.03 per unit of risk. If you would invest  794.00  in Floating Rate Fund on October 10, 2024 and sell it today you would earn a total of  25.00  from holding Floating Rate Fund or generate 3.15% return on investment over 90 days.

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

Floating Rate Fund  vs.  Ab Bond Inflation

Floating Rate

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Floating Rate Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Floating Rate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Bond Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Bond Inflation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ab 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 Floating Rate and Ab Bond

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

The idea behind Floating Rate Fund and Ab Bond Inflation 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.