Correlation Between Versatile Bond and Enhanced Fixed

Can any of the company-specific risk be diversified away by investing in both Versatile Bond and Enhanced Fixed 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 Versatile Bond and Enhanced Fixed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Versatile Bond Portfolio and Enhanced Fixed Income, you can compare the effects of market volatilities on Versatile Bond and Enhanced Fixed 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 Versatile Bond with a short position of Enhanced Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Versatile Bond and Enhanced Fixed.

Diversification Opportunities for Versatile Bond and Enhanced Fixed

0.44

Correlation Coefficient

Versatile Bond  Enhanced Fixed

Very weak diversification

The 3 months correlation between Versatile and Enhanced is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Versatile Bond Portfolio and Enhanced Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enhanced Fixed Income and Versatile Bond 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 Versatile Bond Portfolio are associated (or correlated) with Enhanced Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enhanced Fixed Income has no effect on the direction of Versatile Bond i.e., Versatile Bond and Enhanced Fixed go up and down completely randomly.

Pair Corralation between Versatile Bond and Enhanced Fixed

Assuming the 90 days horizon Versatile Bond Portfolio is expected to generate 0.32 times more return on investment than Enhanced Fixed. However, Versatile Bond Portfolio is 3.15 times less risky than Enhanced Fixed. It trades about 0.15 of its potential returns per unit of risk. Enhanced Fixed Income is currently generating about 0.03 per unit of risk. If you would invest  5,788  in Versatile Bond Portfolio on October 11, 2024 and sell it today you would earn a total of  617.00  from holding Versatile Bond Portfolio or generate 10.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.18%
Values	Daily Returns

Versatile Bond Portfolio  vs.  Enhanced Fixed Income

Versatile Bond Portfolio

Risk-Adjusted Performance

0 of 100

Weak

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

Enhanced Fixed Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Versatile Bond and Enhanced Fixed

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

The idea behind Versatile Bond Portfolio and Enhanced Fixed Income 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.