Correlation Between Us Government and Consumer Goods
Can any of the company-specific risk be diversified away by investing in both Us Government and Consumer Goods 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 Consumer Goods 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 Consumer Goods Ultrasector, you can compare the effects of market volatilities on Us Government and Consumer Goods 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 Consumer Goods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Consumer Goods.
Diversification Opportunities for Us Government and Consumer Goods
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GVPSX and Consumer is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Plus and Consumer Goods Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Goods Ultra 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 Consumer Goods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Goods Ultra has no effect on the direction of Us Government i.e., Us Government and Consumer Goods go up and down completely randomly.
Pair Corralation between Us Government and Consumer Goods
Assuming the 90 days horizon Us Government is expected to generate 2.5 times less return on investment than Consumer Goods. In addition to that, Us Government is 1.58 times more volatile than Consumer Goods Ultrasector. It trades about 0.06 of its total potential returns per unit of risk. Consumer Goods Ultrasector is currently generating about 0.25 per unit of volatility. If you would invest 6,660 in Consumer Goods Ultrasector on September 1, 2024 and sell it today you would earn a total of 350.00 from holding Consumer Goods Ultrasector or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Us Government Plus vs. Consumer Goods Ultrasector
Performance |
| Timeline |
| Us Government Plus |
| Consumer Goods Ultra |
Us Government and Consumer Goods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and Consumer Goods
The main advantage of trading using opposite Us Government and Consumer Goods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government position performs unexpectedly, Consumer Goods 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 Consumer Goods will offset losses from the drop in Consumer Goods' 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 |
| Consumer Goods vs. Consumer Goods Ultrasector | Consumer Goods vs. Consumer Services Ultrasector | Consumer Goods vs. Ultramid Cap Profund Ultramid Cap | Consumer Goods vs. Internet Ultrasector Profund |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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