Correlation Between Us Government and New Economy
Can any of the company-specific risk be diversified away by investing in both Us Government and New Economy 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 New Economy 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 New Economy Fund, you can compare the effects of market volatilities on Us Government and New Economy 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 New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and New Economy.
Diversification Opportunities for Us Government and New Economy
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CGTCX and New is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund 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 New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Us Government i.e., Us Government and New Economy go up and down completely randomly.
Pair Corralation between Us Government and New Economy
Assuming the 90 days horizon Us Government Securities is expected to under-perform the New Economy. But the mutual fund apears to be less risky and, when comparing its historical volatility, Us Government Securities is 3.49 times less risky than New Economy. The mutual fund trades about -0.11 of its potential returns per unit of risk. The New Economy Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6,361 in New Economy Fund on August 27, 2024 and sell it today you would earn a total of 51.00 from holding New Economy Fund or generate 0.8% 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. New Economy Fund
Performance |
| Timeline |
| Us Government Securities |
| New Economy Fund |
Us Government and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and New Economy
The main advantage of trading using opposite Us Government and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy's long position.| Us Government vs. Touchstone Large Cap | Us Government vs. Transamerica Large Cap | Us Government vs. T Rowe Price | Us Government vs. Goldman Sachs Large |
| New Economy vs. Target Retirement 2040 | New Economy vs. Fidelity Managed Retirement | New Economy vs. Jp Morgan Smartretirement | New Economy vs. Qs Moderate Growth |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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