Correlation Between Core Plus and Mesirow Financial

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

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

Diversification Opportunities for Core Plus and Mesirow Financial

0.77

Correlation Coefficient

Core Plus  Mesirow Financial

Poor diversification

The 3 months correlation between Core and Mesirow is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Core Plus Bond and Mesirow Financial Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesirow Financial Small and Core Plus 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 Core Plus Bond are associated (or correlated) with Mesirow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesirow Financial Small has no effect on the direction of Core Plus i.e., Core Plus and Mesirow Financial go up and down completely randomly.

Pair Corralation between Core Plus and Mesirow Financial

Assuming the 90 days horizon Core Plus Bond is expected to generate 0.18 times more return on investment than Mesirow Financial. However, Core Plus Bond is 5.6 times less risky than Mesirow Financial. It trades about -0.11 of its potential returns per unit of risk. Mesirow Financial Small is currently generating about -0.04 per unit of risk. If you would invest  906.00  in Core Plus Bond on October 27, 2024 and sell it today you would lose (7.00) from holding Core Plus Bond or give up 0.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	36.67%
Values	Daily Returns

Core Plus Bond  vs.  Mesirow Financial Small

Core Plus Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mesirow Financial Small

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Core Plus and Mesirow Financial

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

The idea behind Core Plus Bond and Mesirow Financial Small 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.