Correlation Between Strategic Bond and Inverse Government
Can any of the company-specific risk be diversified away by investing in both Strategic Bond and Inverse 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 Strategic Bond and Inverse Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Bond Fund and Inverse Government Long, you can compare the effects of market volatilities on Strategic Bond and Inverse 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 Strategic Bond with a short position of Inverse Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Bond and Inverse Government.
Diversification Opportunities for Strategic Bond and Inverse Government
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Strategic and Inverse is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Bond Fund and Inverse Government Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Government Long and Strategic Bond 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 Strategic Bond Fund are associated (or correlated) with Inverse Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Government Long has no effect on the direction of Strategic Bond i.e., Strategic Bond and Inverse Government go up and down completely randomly.
Pair Corralation between Strategic Bond and Inverse Government
Assuming the 90 days horizon Strategic Bond Fund is expected to under-perform the Inverse Government. But the mutual fund apears to be less risky and, when comparing its historical volatility, Strategic Bond Fund is 2.71 times less risky than Inverse Government. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Inverse Government Long is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 16,208 in Inverse Government Long on November 3, 2024 and sell it today you would earn a total of 2,355 from holding Inverse Government Long or generate 14.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Bond Fund vs. Inverse Government Long
Performance |
| Timeline |
| Strategic Bond |
| Inverse Government Long |
Strategic Bond and Inverse Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Bond and Inverse Government
The main advantage of trading using opposite Strategic Bond and Inverse Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Bond position performs unexpectedly, Inverse 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 Inverse Government will offset losses from the drop in Inverse Government's long position.| Strategic Bond vs. Aqr Global Macro | Strategic Bond vs. Kinetics Global Fund | Strategic Bond vs. Rbc Global Equity | Strategic Bond vs. Qs Global Equity |
| Inverse Government vs. Diversified Income Fund | Inverse Government vs. Lord Abbett Diversified | Inverse Government vs. Harbor Diversified International | Inverse Government vs. Madison Diversified Income |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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