Correlation Between New York and Target Retirement

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

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

Diversification Opportunities for New York and Target Retirement

-0.33

Correlation Coefficient

New York  Target Retirement

Very good diversification

The 3 months correlation between New and Target is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding New York Bond and Target Retirement Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Retirement Income and New York 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 New York Bond are associated (or correlated) with Target Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Retirement Income has no effect on the direction of New York i.e., New York and Target Retirement go up and down completely randomly.

Pair Corralation between New York and Target Retirement

Assuming the 90 days horizon New York Bond is expected to under-perform the Target Retirement. In addition to that, New York is 1.93 times more volatile than Target Retirement Income. It trades about -0.04 of its total potential returns per unit of risk. Target Retirement Income is currently generating about 0.12 per unit of volatility. If you would invest  1,011  in Target Retirement Income on September 15, 2024 and sell it today you would earn a total of  98.00  from holding Target Retirement Income or generate 9.69% return on investment over 90 days.

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

New York Bond  vs.  Target Retirement Income

New York Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New York Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Target Retirement Income

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Target Retirement Income are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Target Retirement is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with New York and Target Retirement

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

The idea behind New York Bond and Target Retirement 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.