Correlation Between Intermediate-term and Value Fund
Can any of the company-specific risk be diversified away by investing in both Intermediate-term and Value Fund 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 Intermediate-term and Value Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intermediate Term Tax Free Bond and Value Fund I, you can compare the effects of market volatilities on Intermediate-term and Value Fund 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 Intermediate-term with a short position of Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate-term and Value Fund.
Diversification Opportunities for Intermediate-term and Value Fund
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Intermediate-term and Value is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Tax Free Bon and Value Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund I and Intermediate-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 Intermediate Term Tax Free Bond are associated (or correlated) with Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund I has no effect on the direction of Intermediate-term i.e., Intermediate-term and Value Fund go up and down completely randomly.
Pair Corralation between Intermediate-term and Value Fund
Assuming the 90 days horizon Intermediate-term is expected to generate 9.82 times less return on investment than Value Fund. But when comparing it to its historical volatility, Intermediate Term Tax Free Bond is 5.76 times less risky than Value Fund. It trades about 0.11 of its potential returns per unit of risk. Value Fund I is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 760.00 in Value Fund I on April 24, 2025 and sell it today you would earn a total of 66.00 from holding Value Fund I or generate 8.68% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Intermediate Term Tax Free Bon vs. Value Fund I
Performance |
Timeline |
Intermediate Term Tax |
Value Fund I |
Intermediate-term and Value Fund Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Intermediate-term and Value Fund
The main advantage of trading using opposite Intermediate-term and Value Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate-term position performs unexpectedly, Value Fund 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 Value Fund will offset losses from the drop in Value Fund's long position.Intermediate-term vs. United Kingdom Small | Intermediate-term vs. Scout Small Cap | Intermediate-term vs. Guidemark Smallmid Cap | Intermediate-term vs. Ab Small Cap |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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