Correlation Between Long-term and All Asset
Can any of the company-specific risk be diversified away by investing in both Long-term and All Asset 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 Long-term and All Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Long Term Government Fund and All Asset Fund, you can compare the effects of market volatilities on Long-term and All Asset 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 Long-term with a short position of All Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long-term and All Asset.
Diversification Opportunities for Long-term and All Asset
Poor diversification
The 3 months correlation between Long-term and All is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Long Term Government Fund and All Asset Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All Asset Fund and Long-term 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 Long Term Government Fund are associated (or correlated) with All Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All Asset Fund has no effect on the direction of Long-term i.e., Long-term and All Asset go up and down completely randomly.
Pair Corralation between Long-term and All Asset
Assuming the 90 days horizon Long Term Government Fund is expected to generate 2.77 times more return on investment than All Asset. However, Long-term is 2.77 times more volatile than All Asset Fund. It trades about 0.29 of its potential returns per unit of risk. All Asset Fund is currently generating about 0.28 per unit of risk. If you would invest 1,381 in Long Term Government Fund on December 5, 2024 and sell it today you would earn a total of 68.00 from holding Long Term Government Fund or generate 4.92% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Long Term Government Fund vs. All Asset Fund
Performance |
Timeline |
Long Term Government |
All Asset Fund |
Long-term and All Asset Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Long-term and All Asset
The main advantage of trading using opposite Long-term and All Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Long-term position performs unexpectedly, All Asset 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 All Asset will offset losses from the drop in All Asset's long position.Long-term vs. Franklin Small Cap | Long-term vs. Small Pany Growth | Long-term vs. Channing Intrinsic Value | Long-term vs. Segall Bryant Hamill |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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