Correlation Between Us Government and Sp 500
Can any of the company-specific risk be diversified away by investing in both Us Government and Sp 500 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 Us Government and Sp 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Government Securities and Sp 500 Index, you can compare the effects of market volatilities on Us Government and Sp 500 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 Us Government with a short position of Sp 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Sp 500.
Diversification Opportunities for Us Government and Sp 500
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between CAUKX and SPFIX is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and Sp 500 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp 500 Index and Us Government 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 Us Government Securities are associated (or correlated) with Sp 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp 500 Index has no effect on the direction of Us Government i.e., Us Government and Sp 500 go up and down completely randomly.
Pair Corralation between Us Government and Sp 500
Assuming the 90 days horizon Us Government is expected to generate 14.88 times less return on investment than Sp 500. But when comparing it to its historical volatility, Us Government Securities is 2.53 times less risky than Sp 500. It trades about 0.01 of its potential returns per unit of risk. Sp 500 Index is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 5,965 in Sp 500 Index on August 26, 2024 and sell it today you would earn a total of 2,506 from holding Sp 500 Index or generate 42.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Government Securities vs. Sp 500 Index
Performance |
| Timeline |
| Us Government Securities |
| Sp 500 Index |
Us Government and Sp 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and Sp 500
The main advantage of trading using opposite Us Government and Sp 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government position performs unexpectedly, Sp 500 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 Sp 500 will offset losses from the drop in Sp 500's long position.| Us Government vs. Eagle Mlp Strategy | Us Government vs. Transamerica Emerging Markets | Us Government vs. Ep Emerging Markets | Us Government vs. Barings Emerging Markets |
| Sp 500 vs. Sp Midcap Index | Sp 500 vs. Sp Smallcap Index | Sp 500 vs. Deutsche Equity 500 | Sp 500 vs. Dreyfus Institutional Sp |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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