Correlation Between Floating Rate and Short Term
Can any of the company-specific risk be diversified away by investing in both Floating Rate and Short Term 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 Floating Rate and Short Term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Floating Rate Fund and Short Term Government Fund, you can compare the effects of market volatilities on Floating Rate and Short Term 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 Floating Rate with a short position of Short Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Floating Rate and Short Term.
Diversification Opportunities for Floating Rate and Short Term
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Floating and Short is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Floating Rate Fund and Short Term Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Government and Floating Rate 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 Floating Rate Fund are associated (or correlated) with Short Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Government has no effect on the direction of Floating Rate i.e., Floating Rate and Short Term go up and down completely randomly.
Pair Corralation between Floating Rate and Short Term
Assuming the 90 days horizon Floating Rate Fund is not expected to generate positive returns. However, Floating Rate Fund is 2.41 times less risky than Short Term. It waists most of its returns potential to compensate for thr risk taken. Short Term is generating about 0.11 per unit of risk. If you would invest 892.00 in Short Term Government Fund on September 12, 2024 and sell it today you would earn a total of 2.00 from holding Short Term Government Fund or generate 0.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Floating Rate Fund vs. Short Term Government Fund
Performance |
| Timeline |
| Floating Rate |
| Short Term Government |
Floating Rate and Short Term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Floating Rate and Short Term
The main advantage of trading using opposite Floating Rate and Short Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Floating Rate position performs unexpectedly, Short Term 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 Term will offset losses from the drop in Short Term's long position.| Floating Rate vs. California High Yield Municipal | Floating Rate vs. Nuveen Minnesota Municipal | Floating Rate vs. T Rowe Price | Floating Rate vs. Blrc Sgy Mnp |
| Short Term vs. T Rowe Price | Short Term vs. Locorr Market Trend | Short Term vs. Kinetics Market Opportunities | Short Term vs. Transamerica Emerging Markets |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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