Correlation Between Ginnie Mae and Government Bond
Can any of the company-specific risk be diversified away by investing in both Ginnie Mae and Government Bond 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 Ginnie Mae and Government Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ginnie Mae Fund and Government Bond Fund, you can compare the effects of market volatilities on Ginnie Mae and Government Bond 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 Ginnie Mae with a short position of Government Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ginnie Mae and Government Bond.
Diversification Opportunities for Ginnie Mae and Government Bond
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Ginnie and Government is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Ginnie Mae Fund and Government Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Bond and Ginnie Mae 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 Ginnie Mae Fund are associated (or correlated) with Government Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Bond has no effect on the direction of Ginnie Mae i.e., Ginnie Mae and Government Bond go up and down completely randomly.
Pair Corralation between Ginnie Mae and Government Bond
Assuming the 90 days horizon Ginnie Mae Fund is expected to generate 1.03 times more return on investment than Government Bond. However, Ginnie Mae is 1.03 times more volatile than Government Bond Fund. It trades about 0.01 of its potential returns per unit of risk. Government Bond Fund is currently generating about 0.01 per unit of risk. If you would invest 863.00 in Ginnie Mae Fund on August 24, 2024 and sell it today you would earn a total of 18.00 from holding Ginnie Mae Fund or generate 2.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ginnie Mae Fund vs. Government Bond Fund
Performance |
| Timeline |
| Ginnie Mae Fund |
| Government Bond |
Ginnie Mae and Government Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ginnie Mae and Government Bond
The main advantage of trading using opposite Ginnie Mae and Government Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ginnie Mae position performs unexpectedly, Government Bond 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 Government Bond will offset losses from the drop in Government Bond's long position.| Ginnie Mae vs. Vanguard Gnma Fund | Ginnie Mae vs. Vanguard Intermediate Term Government | Ginnie Mae vs. Us Government Securities | Ginnie Mae vs. Us Government Securities |
| Government Bond vs. Inflation Adjusted Bond Fund | Government Bond vs. Ginnie Mae Fund | Government Bond vs. Short Term Government Fund | Government Bond vs. Diversified Bond Fund |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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