Correlation Between Nova Fund and Inverse Government
Can any of the company-specific risk be diversified away by investing in both Nova Fund 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 Nova Fund and Inverse Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nova Fund Class and Inverse Government Long, you can compare the effects of market volatilities on Nova Fund 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 Nova Fund with a short position of Inverse Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Fund and Inverse Government.
Diversification Opportunities for Nova Fund and Inverse Government
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nova and Inverse is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Nova Fund Class 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 Nova Fund 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 Nova Fund Class 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 Nova Fund i.e., Nova Fund and Inverse Government go up and down completely randomly.
Pair Corralation between Nova Fund and Inverse Government
Assuming the 90 days horizon Nova Fund Class is expected to generate 1.18 times more return on investment than Inverse Government. However, Nova Fund is 1.18 times more volatile than Inverse Government Long. It trades about 0.12 of its potential returns per unit of risk. Inverse Government Long is currently generating about 0.14 per unit of risk. If you would invest 12,856 in Nova Fund Class on August 30, 2024 and sell it today you would earn a total of 734.00 from holding Nova Fund Class or generate 5.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nova Fund Class vs. Inverse Government Long
Performance |
| Timeline |
| Nova Fund Class |
| Inverse Government Long |
Nova Fund and Inverse Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nova Fund and Inverse Government
The main advantage of trading using opposite Nova Fund and Inverse Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nova Fund 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.| Nova Fund vs. Basic Materials Fund | Nova Fund vs. Basic Materials Fund | Nova Fund vs. Banking Fund Class | Nova Fund vs. Basic Materials Fund |
| Inverse Government vs. Oppenheimer Gold Special | Inverse Government vs. Fidelity Advisor Gold | Inverse Government vs. Gamco Global Gold | Inverse Government vs. Global Gold 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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