Correlation Between Federated Government and Inverse Government
Can any of the company-specific risk be diversified away by investing in both Federated Government and Inverse Government 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 Federated Government and Inverse Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Government Ultrashort and Inverse Government Long, you can compare the effects of market volatilities on Federated Government and Inverse Government 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 Federated Government with a short position of Inverse Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Inverse Government.
Diversification Opportunities for Federated Government and Inverse Government
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and Inverse is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Ultrashor and Inverse Government Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Government Long and Federated 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 Federated Government Ultrashort are associated (or correlated) with Inverse Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Government Long has no effect on the direction of Federated Government i.e., Federated Government and Inverse Government go up and down completely randomly.
Pair Corralation between Federated Government and Inverse Government
Assuming the 90 days horizon Federated Government Ultrashort is expected to generate 0.04 times more return on investment than Inverse Government. However, Federated Government Ultrashort is 27.23 times less risky than Inverse Government. It trades about 0.12 of its potential returns per unit of risk. Inverse Government Long is currently generating about -0.02 per unit of risk. If you would invest 976.00 in Federated Government Ultrashort on September 1, 2024 and sell it today you would earn a total of 1.00 from holding Federated Government Ultrashort or generate 0.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Government Ultrashor vs. Inverse Government Long
Performance |
| Timeline |
| Federated Government |
| Inverse Government Long |
Federated Government and Inverse Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Government and Inverse Government
The main advantage of trading using opposite Federated Government and Inverse Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Government position performs unexpectedly, Inverse Government 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 Inverse Government will offset losses from the drop in Inverse Government's long position.| Federated Government vs. Federated Emerging Market | Federated Government vs. Federated Mdt All | Federated Government vs. Federated Mdt Balanced | Federated Government vs. Federated Global Allocation |
| Inverse Government vs. Commonwealth Global Fund | Inverse Government vs. Ab Global Risk | Inverse Government vs. Scharf Global Opportunity | Inverse Government vs. Us Global Leaders |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Stocks Directory Find actively traded stocks across global markets | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal |