Correlation Between Money Market and Intermediate Government
Can any of the company-specific risk be diversified away by investing in both Money Market and Intermediate 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 Money Market and Intermediate Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Money Market Obligations and Intermediate Government Bond, you can compare the effects of market volatilities on Money Market and Intermediate 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 Money Market with a short position of Intermediate Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Money Market and Intermediate Government.
Diversification Opportunities for Money Market and Intermediate Government
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Money and Intermediate is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Money Market Obligations and Intermediate Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Government and Money Market 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 Money Market Obligations are associated (or correlated) with Intermediate Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Government has no effect on the direction of Money Market i.e., Money Market and Intermediate Government go up and down completely randomly.
Pair Corralation between Money Market and Intermediate Government
Assuming the 90 days horizon Money Market is expected to generate 2.11 times less return on investment than Intermediate Government. In addition to that, Money Market is 1.01 times more volatile than Intermediate Government Bond. It trades about 0.08 of its total potential returns per unit of risk. Intermediate Government Bond is currently generating about 0.18 per unit of volatility. If you would invest 927.00 in Intermediate Government Bond on October 30, 2024 and sell it today you would earn a total of 20.00 from holding Intermediate Government Bond or generate 2.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Money Market Obligations vs. Intermediate Government Bond
Performance |
| Timeline |
| Money Market Obligations |
| Intermediate Government |
Money Market and Intermediate Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Money Market and Intermediate Government
The main advantage of trading using opposite Money Market and Intermediate Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Money Market position performs unexpectedly, Intermediate 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 Intermediate Government will offset losses from the drop in Intermediate Government's long position.| Money Market vs. Vanguard Reit Index | Money Market vs. Redwood Real Estate | Money Market vs. Prudential Real Estate | Money Market vs. Baron Real Estate |
| Intermediate Government vs. World Energy Fund | Intermediate Government vs. Hennessy Bp Energy | Intermediate Government vs. Vanguard Energy Index | Intermediate Government vs. Energy Services 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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