Correlation Between Cavanal Hill and Limited Duration

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

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

Diversification Opportunities for Cavanal Hill and Limited Duration

-0.49

Correlation Coefficient

Cavanal Hill  Limited Duration

Very good diversification

The 3 months correlation between Cavanal and Limited is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cavanal Hill Hedged and Limited Duration Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limited Duration and Cavanal Hill 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 Cavanal Hill Hedged 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 Cavanal Hill i.e., Cavanal Hill and Limited Duration go up and down completely randomly.

Pair Corralation between Cavanal Hill and Limited Duration

Assuming the 90 days horizon Cavanal Hill Hedged is expected to generate 5.1 times more return on investment than Limited Duration. However, Cavanal Hill is 5.1 times more volatile than Limited Duration Fund. It trades about 0.68 of its potential returns per unit of risk. Limited Duration Fund is currently generating about 0.13 per unit of risk. If you would invest  1,035  in Cavanal Hill Hedged on February 18, 2025 and sell it today you would earn a total of  128.00  from holding Cavanal Hill Hedged or generate 12.37% return on investment over 90 days.

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

Cavanal Hill Hedged  vs.  Limited Duration Fund

Cavanal Hill Hedged

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cavanal Hill Hedged has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Cavanal Hill 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

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Limited Duration Fund are ranked lower than 10 (%) 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 Cavanal Hill and Limited Duration

The main advantage of trading using opposite Cavanal Hill and Limited Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cavanal Hill 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 Cavanal Hill Hedged 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..