Correlation Between Intermediate Government and Large-cap Growth
Can any of the company-specific risk be diversified away by investing in both Intermediate Government and Large-cap Growth 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 Large-cap Growth 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 Large Cap Growth Profund, you can compare the effects of market volatilities on Intermediate Government and Large-cap Growth 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 Large-cap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate Government and Large-cap Growth.
Diversification Opportunities for Intermediate Government and Large-cap Growth
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Intermediate and LARGE-CAP is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Government Bond and Large Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Growth 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 Large-cap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Growth has no effect on the direction of Intermediate Government i.e., Intermediate Government and Large-cap Growth go up and down completely randomly.
Pair Corralation between Intermediate Government and Large-cap Growth
Assuming the 90 days horizon Intermediate Government is expected to generate 3.66 times less return on investment than Large-cap Growth. But when comparing it to its historical volatility, Intermediate Government Bond is 10.67 times less risky than Large-cap Growth. It trades about 0.21 of its potential returns per unit of risk. Large Cap Growth Profund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,715 in Large Cap Growth Profund on October 26, 2024 and sell it today you would earn a total of 68.00 from holding Large Cap Growth Profund or generate 1.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intermediate Government Bond vs. Large Cap Growth Profund
Performance |
| Timeline |
| Intermediate Government |
| Large Cap Growth |
Intermediate Government and Large-cap Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intermediate Government and Large-cap Growth
The main advantage of trading using opposite Intermediate Government and Large-cap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate Government position performs unexpectedly, Large-cap Growth 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 Large-cap Growth will offset losses from the drop in Large-cap Growth's long position.The idea behind Intermediate Government Bond and Large Cap Growth Profund 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.
| Large-cap Growth vs. Hsbc Government Money | Large-cap Growth vs. Virtus Seix Government | Large-cap Growth vs. Intermediate Government Bond | Large-cap Growth vs. Inverse Government Long |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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