Correlation Between Government Long and Financial Services
Can any of the company-specific risk be diversified away by investing in both Government Long and Financial Services 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 Government Long and Financial Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Government Long Bond and Financial Services Fund, you can compare the effects of market volatilities on Government Long and Financial Services 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 Government Long with a short position of Financial Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Government Long and Financial Services.
Diversification Opportunities for Government Long and Financial Services
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Government and Financial is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Government Long Bond and Financial Services Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Services and Government Long 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 Government Long Bond are associated (or correlated) with Financial Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Services has no effect on the direction of Government Long i.e., Government Long and Financial Services go up and down completely randomly.
Pair Corralation between Government Long and Financial Services
Assuming the 90 days horizon Government Long Bond is expected to under-perform the Financial Services. In addition to that, Government Long is 1.24 times more volatile than Financial Services Fund. It trades about -0.02 of its total potential returns per unit of risk. Financial Services Fund is currently generating about 0.08 per unit of volatility. If you would invest 7,065 in Financial Services Fund on August 26, 2024 and sell it today you would earn a total of 3,248 from holding Financial Services Fund or generate 45.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Government Long Bond vs. Financial Services Fund
Performance |
| Timeline |
| Government Long Bond |
| Financial Services |
Government Long and Financial Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Government Long and Financial Services
The main advantage of trading using opposite Government Long and Financial Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Government Long position performs unexpectedly, Financial Services 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 Financial Services will offset losses from the drop in Financial Services' long position.| Government Long vs. Fidelity Real Estate | Government Long vs. Deutsche Real Estate | Government Long vs. Franklin Real Estate | Government Long vs. Great West Real Estate |
| Financial Services vs. Health Care Fund | Financial Services vs. Banking Fund Investor | Financial Services vs. Technology Fund Investor | Financial Services vs. Transportation Fund Investor |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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