Correlation Between Sextant International and Sextant Bond

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

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

Diversification Opportunities for Sextant International and Sextant Bond

0.66

Correlation Coefficient

Sextant International  Sextant Bond

Poor diversification

The 3 months correlation between Sextant and Sextant is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sextant International Fund and Sextant Bond Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sextant Bond Income and Sextant International 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 Sextant International Fund are associated (or correlated) with Sextant Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sextant Bond Income has no effect on the direction of Sextant International i.e., Sextant International and Sextant Bond go up and down completely randomly.

Pair Corralation between Sextant International and Sextant Bond

Assuming the 90 days horizon Sextant International Fund is expected to generate 2.2 times more return on investment than Sextant Bond. However, Sextant International is 2.2 times more volatile than Sextant Bond Income. It trades about -0.03 of its potential returns per unit of risk. Sextant Bond Income is currently generating about -0.15 per unit of risk. If you would invest  2,361  in Sextant International Fund on September 14, 2024 and sell it today you would lose (40.00) from holding Sextant International Fund or give up 1.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Sextant International Fund  vs.  Sextant Bond Income

Sextant International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sextant Bond Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sextant Bond Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Sextant 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 Sextant International and Sextant Bond

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

The idea behind Sextant International Fund and Sextant Bond 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.