Correlation Between Us Government and Aig Government
Can any of the company-specific risk be diversified away by investing in both Us Government and Aig 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 Us Government and Aig Government 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 Aig Government Money, you can compare the effects of market volatilities on Us Government and Aig 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 Us Government with a short position of Aig Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Aig Government.
Diversification Opportunities for Us Government and Aig Government
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GVPIX and Aig is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Plus and Aig Government Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aig Government Money 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 Aig Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aig Government Money has no effect on the direction of Us Government i.e., Us Government and Aig Government go up and down completely randomly.
Pair Corralation between Us Government and Aig Government
Assuming the 90 days horizon Us Government Plus is expected to generate 5.88 times more return on investment than Aig Government. However, Us Government is 5.88 times more volatile than Aig Government Money. It trades about 0.07 of its potential returns per unit of risk. Aig Government Money is currently generating about 0.15 per unit of risk. If you would invest 3,483 in Us Government Plus on September 1, 2024 and sell it today you would earn a total of 65.00 from holding Us Government Plus or generate 1.87% 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. Aig Government Money
Performance |
| Timeline |
| Us Government Plus |
| Aig Government Money |
Us Government and Aig Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and Aig Government
The main advantage of trading using opposite Us Government and Aig Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government position performs unexpectedly, Aig 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 Aig Government will offset losses from the drop in Aig Government'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 |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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