Correlation Between All Asset and Power Momentum
Can any of the company-specific risk be diversified away by investing in both All Asset and Power Momentum 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 All Asset and Power Momentum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between All Asset Fund and Power Momentum Index, you can compare the effects of market volatilities on All Asset and Power Momentum 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 All Asset with a short position of Power Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of All Asset and Power Momentum.
Diversification Opportunities for All Asset and Power Momentum
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between All and Power is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding All Asset Fund and Power Momentum Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Momentum Index and All Asset 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 All Asset Fund are associated (or correlated) with Power Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Momentum Index has no effect on the direction of All Asset i.e., All Asset and Power Momentum go up and down completely randomly.
Pair Corralation between All Asset and Power Momentum
Assuming the 90 days horizon All Asset Fund is expected to generate 0.45 times more return on investment than Power Momentum. However, All Asset Fund is 2.23 times less risky than Power Momentum. It trades about -0.42 of its potential returns per unit of risk. Power Momentum Index is currently generating about -0.32 per unit of risk. If you would invest 1,135 in All Asset Fund on October 5, 2024 and sell it today you would lose (52.00) from holding All Asset Fund or give up 4.58% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
All Asset Fund vs. Power Momentum Index
Performance |
Timeline |
All Asset Fund |
Power Momentum Index |
All Asset and Power Momentum Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with All Asset and Power Momentum
The main advantage of trading using opposite All Asset and Power Momentum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if All Asset position performs unexpectedly, Power Momentum 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 Power Momentum will offset losses from the drop in Power Momentum's long position.All Asset vs. Neuberger Berman Real | All Asset vs. Forum Real Estate | All Asset vs. Tiaa Cref Real Estate | All Asset vs. Pender Real Estate |
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Check out your portfolio center.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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