Correlation Between Us Government and Short Oil
Can any of the company-specific risk be diversified away by investing in both Us Government and Short Oil 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 Short Oil 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 Short Oil Gas, you can compare the effects of market volatilities on Us Government and Short Oil 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 Short Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Short Oil.
Diversification Opportunities for Us Government and Short Oil
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GVPIX and Short is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Plus and Short Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Oil Gas 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 Short Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Oil Gas has no effect on the direction of Us Government i.e., Us Government and Short Oil go up and down completely randomly.
Pair Corralation between Us Government and Short Oil
Assuming the 90 days horizon Us Government Plus is expected to under-perform the Short Oil. But the mutual fund apears to be less risky and, when comparing its historical volatility, Us Government Plus is 1.03 times less risky than Short Oil. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Short Oil Gas is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,428 in Short Oil Gas on August 30, 2024 and sell it today you would lose (199.00) from holding Short Oil Gas or give up 13.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Us Government Plus vs. Short Oil Gas
Performance |
| Timeline |
| Us Government Plus |
| Short Oil Gas |
Us Government and Short Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and Short Oil
The main advantage of trading using opposite Us Government and Short Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government position performs unexpectedly, Short Oil 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 Short Oil will offset losses from the drop in Short Oil's long position.| Us Government vs. Blackrock Moderate Prepared | Us Government vs. Saat Moderate Strategy | Us Government vs. Wisdomtree Siegel Moderate | Us Government vs. Target Retirement 2040 |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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