Correlation Between Us Government and Defensive Market
Can any of the company-specific risk be diversified away by investing in both Us Government and Defensive Market 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 Defensive Market 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 Defensive Market Strategies, you can compare the effects of market volatilities on Us Government and Defensive Market 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 Defensive Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Defensive Market.
Diversification Opportunities for Us Government and Defensive Market
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between CGTCX and Defensive is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and Defensive Market Strategies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defensive Market Str 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 Defensive Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defensive Market Str has no effect on the direction of Us Government i.e., Us Government and Defensive Market go up and down completely randomly.
Pair Corralation between Us Government and Defensive Market
Assuming the 90 days horizon Us Government is expected to generate 8.19 times less return on investment than Defensive Market. But when comparing it to its historical volatility, Us Government Securities is 1.23 times less risky than Defensive Market. It trades about 0.06 of its potential returns per unit of risk. Defensive Market Strategies is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 1,249 in Defensive Market Strategies on September 1, 2024 and sell it today you would earn a total of 45.00 from holding Defensive Market Strategies or generate 3.6% 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. Defensive Market Strategies
Performance |
| Timeline |
| Us Government Securities |
| Defensive Market Str |
Us Government and Defensive Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and Defensive Market
The main advantage of trading using opposite Us Government and Defensive Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government position performs unexpectedly, Defensive Market 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 Defensive Market will offset losses from the drop in Defensive Market's long position.| Us Government vs. Wasatch Global Opportunities | Us Government vs. Commonwealth Global Fund | Us Government vs. Ms Global Fixed | Us Government vs. Federated Global Allocation |
| Defensive Market vs. Franklin Government Money | Defensive Market vs. Us Government Securities | Defensive Market vs. Fidelity Series Government | Defensive Market vs. Blackrock Government Bond |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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