Correlation Between Balanced Strategy and Limited Duration
Can any of the company-specific risk be diversified away by investing in both Balanced Strategy 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 Balanced Strategy and Limited Duration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Strategy Fund and Limited Duration Fund, you can compare the effects of market volatilities on Balanced Strategy 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 Balanced Strategy with a short position of Limited Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Strategy and Limited Duration.
Diversification Opportunities for Balanced Strategy and Limited Duration
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Balanced and Limited is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy 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 Balanced Strategy 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 Balanced Strategy 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 Balanced Strategy i.e., Balanced Strategy and Limited Duration go up and down completely randomly.
Pair Corralation between Balanced Strategy and Limited Duration
Assuming the 90 days horizon Balanced Strategy Fund is expected to generate 2.25 times more return on investment than Limited Duration. However, Balanced Strategy is 2.25 times more volatile than Limited Duration Fund. It trades about 0.19 of its potential returns per unit of risk. Limited Duration Fund is currently generating about 0.15 per unit of risk. If you would invest 1,077 in Balanced Strategy Fund on May 29, 2025 and sell it today you would earn a total of 20.00 from holding Balanced Strategy Fund or generate 1.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Strategy Fund vs. Limited Duration Fund
Performance |
| Timeline |
| Balanced Strategy |
| Limited Duration |
Balanced Strategy and Limited Duration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Strategy and Limited Duration
The main advantage of trading using opposite Balanced Strategy and Limited Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Strategy 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.| Balanced Strategy vs. International Developed Markets | Balanced Strategy vs. Global Real Estate | Balanced Strategy vs. Global Real Estate | Balanced Strategy vs. Global Real Estate |
| Limited Duration vs. Franklin Emerging Market | Limited Duration vs. T Rowe Price | Limited Duration vs. Angel Oak Multi Strategy | Limited Duration vs. Ab Bond Inflation |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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