Correlation Between Inverse Government and Fam Small
Can any of the company-specific risk be diversified away by investing in both Inverse Government and Fam Small 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 Inverse Government and Fam Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse Government Long and Fam Small Cap, you can compare the effects of market volatilities on Inverse Government and Fam Small 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 Inverse Government with a short position of Fam Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Government and Fam Small.
Diversification Opportunities for Inverse Government and Fam Small
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Inverse and Fam is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Government Long and Fam Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fam Small Cap and Inverse Government 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 Inverse Government Long are associated (or correlated) with Fam Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fam Small Cap has no effect on the direction of Inverse Government i.e., Inverse Government and Fam Small go up and down completely randomly.
Pair Corralation between Inverse Government and Fam Small
Assuming the 90 days horizon Inverse Government is expected to generate 1.56 times less return on investment than Fam Small. But when comparing it to its historical volatility, Inverse Government Long is 1.1 times less risky than Fam Small. It trades about 0.05 of its potential returns per unit of risk. Fam Small Cap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,396 in Fam Small Cap on September 1, 2024 and sell it today you would earn a total of 637.00 from holding Fam Small Cap or generate 26.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Government Long vs. Fam Small Cap
Performance |
| Timeline |
| Inverse Government Long |
| Fam Small Cap |
Inverse Government and Fam Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Government and Fam Small
The main advantage of trading using opposite Inverse Government and Fam Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Government position performs unexpectedly, Fam Small 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 Fam Small will offset losses from the drop in Fam Small's long position.| Inverse Government vs. Commonwealth Global Fund | Inverse Government vs. Ab Global Risk | Inverse Government vs. Scharf Global Opportunity | Inverse Government vs. Us Global Leaders |
| Fam Small vs. The Hartford Midcap | Fam Small vs. Mfs Emerging Markets | Fam Small vs. Wells Fargo Special | Fam Small vs. Baron Emerging Markets |
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 CEOs Directory module to screen CEOs from public companies around the world.
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