Correlation Between Power Income and Power Momentum
Can any of the company-specific risk be diversified away by investing in both Power Income and Power Momentum 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 Power Income and Power Momentum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Income Fund and Power Momentum Index, you can compare the effects of market volatilities on Power Income and Power Momentum 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 Power Income with a short position of Power Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Income and Power Momentum.
Diversification Opportunities for Power Income and Power Momentum
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Power and Power is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Power Income Fund and Power Momentum Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Momentum Index and Power Income 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 Power Income Fund are associated (or correlated) with Power Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Momentum Index has no effect on the direction of Power Income i.e., Power Income and Power Momentum go up and down completely randomly.
Pair Corralation between Power Income and Power Momentum
Assuming the 90 days horizon Power Income Fund is expected to generate 0.26 times more return on investment than Power Momentum. However, Power Income Fund is 3.92 times less risky than Power Momentum. It trades about -0.23 of its potential returns per unit of risk. Power Momentum Index is currently generating about -0.18 per unit of risk. If you would invest 877.00 in Power Income Fund on January 30, 2024 and sell it today you would lose (11.00) from holding Power Income Fund or give up 1.25% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Power Income Fund vs. Power Momentum Index
Performance |
Timeline |
Power Me Fund |
Power Momentum Index |
Power Income and Power Momentum Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Power Income and Power Momentum
The main advantage of trading using opposite Power Income and Power Momentum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Income position performs unexpectedly, Power Momentum 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 Power Momentum will offset losses from the drop in Power Momentum's long position.Power Income vs. Blackrock Strategic Opps | Power Income vs. Jpmorgan Strategic Income | Power Income vs. Jpmorgan Strategic Income |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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