Correlation Between Limited Duration and Limited Duration

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

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

Diversification Opportunities for Limited Duration and Limited Duration

1.0

Correlation Coefficient

Limited Duration  Limited Duration

No risk reduction

The 3 months correlation between Limited and Limited is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Limited Duration Fund and Limited Duration Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limited Duration and Limited Duration 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 Limited Duration Fund are associated (or correlated) with Limited Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limited Duration has no effect on the direction of Limited Duration i.e., Limited Duration and Limited Duration go up and down completely randomly.

Pair Corralation between Limited Duration and Limited Duration

Assuming the 90 days horizon Limited Duration is expected to generate 1.14 times less return on investment than Limited Duration. But when comparing it to its historical volatility, Limited Duration Fund is 1.01 times less risky than Limited Duration. It trades about 0.07 of its potential returns per unit of risk. Limited Duration Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  925.00  in Limited Duration Fund on May 5, 2025 and sell it today you would earn a total of  8.00  from holding Limited Duration Fund or generate 0.86% return on investment over 90 days.

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

Limited Duration Fund  vs.  Limited Duration Fund

Limited Duration

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Limited Duration Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Limited Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Limited Duration

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Limited Duration Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Limited Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Limited Duration and Limited Duration

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

The idea behind Limited Duration Fund and Limited Duration 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.