Correlation Between Absolute Convertible and Short-term Income
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Short-term Income 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 Absolute Convertible and Short-term Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Convertible Arbitrage and Short Term Income Fund, you can compare the effects of market volatilities on Absolute Convertible and Short-term Income 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 Absolute Convertible with a short position of Short-term Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Short-term Income.
Diversification Opportunities for Absolute Convertible and Short-term Income
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Absolute and Short-term is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Short Term Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Income and Absolute Convertible 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 Absolute Convertible Arbitrage are associated (or correlated) with Short-term Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Income has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Short-term Income go up and down completely randomly.
Pair Corralation between Absolute Convertible and Short-term Income
Assuming the 90 days horizon Absolute Convertible is expected to generate 1.09 times less return on investment than Short-term Income. But when comparing it to its historical volatility, Absolute Convertible Arbitrage is 1.48 times less risky than Short-term Income. It trades about 0.44 of its potential returns per unit of risk. Short Term Income Fund is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 1,208 in Short Term Income Fund on June 8, 2025 and sell it today you would earn a total of 9.00 from holding Short Term Income Fund or generate 0.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Short Term Income Fund
Performance |
| Timeline |
| Absolute Convertible |
| Short Term Income |
Absolute Convertible and Short-term Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Short-term Income
The main advantage of trading using opposite Absolute Convertible and Short-term Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Short-term Income 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 Short-term Income will offset losses from the drop in Short-term Income's long position.| Absolute Convertible vs. First Eagle Gold | Absolute Convertible vs. Global Gold Fund | Absolute Convertible vs. The Gold Bullion | Absolute Convertible vs. International Investors Gold |
| Short-term Income vs. Strategic Asset Management | Short-term Income vs. Strategic Asset Management | Short-term Income vs. Strategic Asset Management | Short-term Income vs. Strategic Asset Management |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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