Correlation Between Us Government and Real Estate
Can any of the company-specific risk be diversified away by investing in both Us Government and Real Estate 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 Real Estate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Government Plus and Real Estate Securities, you can compare the effects of market volatilities on Us Government and Real Estate 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 Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Real Estate.
Diversification Opportunities for Us Government and Real Estate
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GVPIX and Real is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Plus and Real Estate Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Securities 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 Plus are associated (or correlated) with Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Securities has no effect on the direction of Us Government i.e., Us Government and Real Estate go up and down completely randomly.
Pair Corralation between Us Government and Real Estate
Assuming the 90 days horizon Us Government Plus is expected to under-perform the Real Estate. In addition to that, Us Government is 1.12 times more volatile than Real Estate Securities. It trades about -0.02 of its total potential returns per unit of risk. Real Estate Securities is currently generating about 0.04 per unit of volatility. If you would invest 2,513 in Real Estate Securities on September 2, 2024 and sell it today you would earn a total of 511.00 from holding Real Estate Securities or generate 20.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Government Plus vs. Real Estate Securities
Performance |
| Timeline |
| Us Government Plus |
| Real Estate Securities |
Us Government and Real Estate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and Real Estate
The main advantage of trading using opposite Us Government and Real Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government position performs unexpectedly, Real Estate 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 Real Estate will offset losses from the drop in Real Estate's long position.| Us Government vs. Short Real Estate | Us Government vs. Short Real Estate | Us Government vs. Ultrashort Mid Cap Profund | Us Government vs. Ultrashort Mid Cap Profund |
| Real Estate vs. Angel Oak Financial | Real Estate vs. Mesirow Financial Small | Real Estate vs. Fidelity Advisor Financial | Real Estate vs. Davis Financial Fund |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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