Correlation Between Government Bond and Pax Balanced
Can any of the company-specific risk be diversified away by investing in both Government Bond and Pax Balanced 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 Government Bond and Pax Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Government Bond Fund and Pax Balanced Fund, you can compare the effects of market volatilities on Government Bond and Pax Balanced 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 Government Bond with a short position of Pax Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Government Bond and Pax Balanced.
Diversification Opportunities for Government Bond and Pax Balanced
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Government and Pax is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Government Bond Fund and Pax Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Balanced and Government Bond 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 Government Bond Fund are associated (or correlated) with Pax Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Balanced has no effect on the direction of Government Bond i.e., Government Bond and Pax Balanced go up and down completely randomly.
Pair Corralation between Government Bond and Pax Balanced
Assuming the 90 days horizon Government Bond is expected to generate 5.11 times less return on investment than Pax Balanced. But when comparing it to its historical volatility, Government Bond Fund is 1.15 times less risky than Pax Balanced. It trades about 0.02 of its potential returns per unit of risk. Pax Balanced Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,271 in Pax Balanced Fund on August 26, 2024 and sell it today you would earn a total of 464.00 from holding Pax Balanced Fund or generate 20.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Government Bond Fund vs. Pax Balanced Fund
Performance |
| Timeline |
| Government Bond |
| Pax Balanced |
Government Bond and Pax Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Government Bond and Pax Balanced
The main advantage of trading using opposite Government Bond and Pax Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Government Bond position performs unexpectedly, Pax Balanced 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 Pax Balanced will offset losses from the drop in Pax Balanced's long position.| Government Bond vs. Qs Large Cap | Government Bond vs. Aqr Large Cap | Government Bond vs. Siit Large Cap | Government Bond vs. Massmutual Select T |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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