Correlation Between Long Term and Short Term
Can any of the company-specific risk be diversified away by investing in both Long Term 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 Long Term and Short Term 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 Short Term Fund C, you can compare the effects of market volatilities on Long Term 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 Long Term with a short position of Short Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long Term and Short Term.
Diversification Opportunities for Long Term and Short Term
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Long and Short is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Long Term Government Fund and Short Term Fund C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Fund 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 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 Fund has no effect on the direction of Long Term i.e., Long Term and Short Term go up and down completely randomly.
Pair Corralation between Long Term and Short Term
Assuming the 90 days horizon Long Term Government Fund is expected to under-perform the Short Term. In addition to that, Long Term is 9.18 times more volatile than Short Term Fund C. It trades about 0.0 of its total potential returns per unit of risk. Short Term Fund C is currently generating about 0.23 per unit of volatility. If you would invest 927.00 in Short Term Fund C on August 28, 2024 and sell it today you would earn a total of 40.00 from holding Short Term Fund C or generate 4.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.52% |
| Values | Daily Returns |
Long Term Government Fund vs. Short Term Fund C
Performance |
| Timeline |
| Long Term Government |
| Short Term Fund |
Long Term and Short Term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Long Term and Short Term
The main advantage of trading using opposite Long Term and Short Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Long Term 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.| Long Term vs. Short Intermediate Bond Fund | Long Term vs. Rbc Short Duration | Long Term vs. Guggenheim Long Short | Long Term vs. Jhancock Short Duration |
| Short Term vs. Victory Integrity Small Cap | Short Term vs. Nationwide Small Cap | Short Term vs. The Hartford Small | Short Term vs. Kinetics Small Cap |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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