Correlation Between Long-term and Total Return
Can any of the company-specific risk be diversified away by investing in both Long-term and Total Return 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 Long-term and Total Return into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Long Term Government Fund and Total Return Fund, you can compare the effects of market volatilities on Long-term and Total Return 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 Long-term with a short position of Total Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long-term and Total Return.
Diversification Opportunities for Long-term and Total Return
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Long-term and Total is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Long Term Government Fund and Total Return Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Return and Long-term 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 Long Term Government Fund are associated (or correlated) with Total Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Return has no effect on the direction of Long-term i.e., Long-term and Total Return go up and down completely randomly.
Pair Corralation between Long-term and Total Return
Assuming the 90 days horizon Long Term Government Fund is expected to generate 2.85 times more return on investment than Total Return. However, Long-term is 2.85 times more volatile than Total Return Fund. It trades about 0.08 of its potential returns per unit of risk. Total Return Fund is currently generating about 0.14 per unit of risk. If you would invest 1,426 in Long Term Government Fund on September 1, 2024 and sell it today you would earn a total of 24.00 from holding Long Term Government Fund or generate 1.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Long Term Government Fund vs. Total Return Fund
Performance |
| Timeline |
| Long Term Government |
| Total Return |
Long-term and Total Return Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Long-term and Total Return
The main advantage of trading using opposite Long-term and Total Return positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Long-term position performs unexpectedly, Total Return 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 Total Return will offset losses from the drop in Total Return's long position.| Long-term vs. Pimco Global Multi Asset | Long-term vs. Us Global Investors | Long-term vs. Us Global Leaders | Long-term vs. Dreyfusstandish Global Fixed |
| Total Return vs. Blackrock Inflation Protected | Total Return vs. Ab Bond Inflation | Total Return vs. Fidelity Advisor 529 | Total Return vs. Lord Abbett Inflation |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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