Correlation Between Intermediate Government and Cutler Equity
Can any of the company-specific risk be diversified away by investing in both Intermediate Government and Cutler Equity 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 Intermediate Government and Cutler Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intermediate Government Bond and Cutler Equity, you can compare the effects of market volatilities on Intermediate Government and Cutler Equity 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 Intermediate Government with a short position of Cutler Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate Government and Cutler Equity.
Diversification Opportunities for Intermediate Government and Cutler Equity
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Intermediate and Cutler is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Government Bond and Cutler Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cutler Equity and Intermediate 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 Intermediate Government Bond are associated (or correlated) with Cutler Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cutler Equity has no effect on the direction of Intermediate Government i.e., Intermediate Government and Cutler Equity go up and down completely randomly.
Pair Corralation between Intermediate Government and Cutler Equity
Assuming the 90 days horizon Intermediate Government is expected to generate 3.58 times less return on investment than Cutler Equity. But when comparing it to its historical volatility, Intermediate Government Bond is 7.84 times less risky than Cutler Equity. It trades about 0.15 of its potential returns per unit of risk. Cutler Equity is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,853 in Cutler Equity on September 15, 2024 and sell it today you would earn a total of 21.00 from holding Cutler Equity or generate 0.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intermediate Government Bond vs. Cutler Equity
Performance |
| Timeline |
| Intermediate Government |
| Cutler Equity |
Intermediate Government and Cutler Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intermediate Government and Cutler Equity
The main advantage of trading using opposite Intermediate Government and Cutler Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate Government position performs unexpectedly, Cutler Equity 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 Cutler Equity will offset losses from the drop in Cutler Equity's long position.The idea behind Intermediate Government Bond and Cutler Equity pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Cutler Equity vs. Short Term Government Fund | Cutler Equity vs. Franklin Adjustable Government | Cutler Equity vs. Payden Government Fund | Cutler Equity vs. Intermediate 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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