Correlation Between Ultra Short-term and 50249AAJ2

Can any of the company-specific risk be diversified away by investing in both Ultra Short-term and 50249AAJ2 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 Ultra Short-term and 50249AAJ2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ultra Short Term Bond and LYB INTERNATIONAL FINANCE, you can compare the effects of market volatilities on Ultra Short-term and 50249AAJ2 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 Ultra Short-term with a short position of 50249AAJ2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Short-term and 50249AAJ2.

Diversification Opportunities for Ultra Short-term and 50249AAJ2

-0.41

Correlation Coefficient

Ultra Short-term  50249AAJ2

Very good diversification

The 3 months correlation between Ultra and 50249AAJ2 is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Short Term Bond and LYB INTERNATIONAL FINANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LYB INTERNATIONAL FINANCE and Ultra Short-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 Ultra Short Term Bond are associated (or correlated) with 50249AAJ2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LYB INTERNATIONAL FINANCE has no effect on the direction of Ultra Short-term i.e., Ultra Short-term and 50249AAJ2 go up and down completely randomly.

Pair Corralation between Ultra Short-term and 50249AAJ2

Assuming the 90 days horizon Ultra Short-term is expected to generate 157.57 times less return on investment than 50249AAJ2. But when comparing it to its historical volatility, Ultra Short Term Bond is 571.3 times less risky than 50249AAJ2. It trades about 0.21 of its potential returns per unit of risk. LYB INTERNATIONAL FINANCE is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,374  in LYB INTERNATIONAL FINANCE on October 12, 2024 and sell it today you would lose (1,051) from holding LYB INTERNATIONAL FINANCE or give up 14.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.96%
Values	Daily Returns

Ultra Short Term Bond  vs.  LYB INTERNATIONAL FINANCE

Ultra Short Term

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Short Term Bond are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ultra Short-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

LYB INTERNATIONAL FINANCE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LYB INTERNATIONAL FINANCE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for LYB INTERNATIONAL FINANCE investors.

Pair Trading with Ultra Short-term and 50249AAJ2

The main advantage of trading using opposite Ultra Short-term and 50249AAJ2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Short-term position performs unexpectedly, 50249AAJ2 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 50249AAJ2 will offset losses from the drop in 50249AAJ2's long position.

The idea behind Ultra Short Term Bond and LYB INTERNATIONAL FINANCE 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.