Correlation Between Sierra E and The Bond

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

By analyzing existing cross correlation between Sierra E Retirement and The Bond Fund, you can compare the effects of market volatilities on Sierra E and The 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 Sierra E with a short position of The Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra E and The Bond.

Diversification Opportunities for Sierra E and The Bond

0.01

Correlation Coefficient

Sierra E  The Bond

Significant diversification

The 3 months correlation between Sierra and The is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and The Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bond Fund and Sierra E 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 Sierra E Retirement are associated (or correlated) with The Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bond Fund has no effect on the direction of Sierra E i.e., Sierra E and The Bond go up and down completely randomly.

Pair Corralation between Sierra E and The Bond

Assuming the 90 days horizon Sierra E Retirement is expected to under-perform the The Bond. In addition to that, Sierra E is 1.37 times more volatile than The Bond Fund. It trades about -0.03 of its total potential returns per unit of risk. The Bond Fund is currently generating about 0.15 per unit of volatility. If you would invest  1,745  in The Bond Fund on December 19, 2024 and sell it today you would earn a total of  47.00  from holding The Bond Fund or generate 2.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Sierra E Retirement  vs.  The Bond Fund

Sierra E Retirement

Risk-Adjusted Performance

Very Weak

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

Bond Fund

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Bond 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, The 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 Sierra E and The Bond

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

The idea behind Sierra E Retirement and The Bond Fund 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.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.