Correlation Between Inverse Government and Federated Government
Can any of the company-specific risk be diversified away by investing in both Inverse Government and Federated 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 Inverse Government and Federated Government 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 Federated Government Ultrashort, you can compare the effects of market volatilities on Inverse Government and Federated 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 Inverse Government with a short position of Federated Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Government and Federated Government.
Diversification Opportunities for Inverse Government and Federated Government
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Inverse and Federated is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Government Long and Federated Government Ultrashor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Government 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 Federated Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Government has no effect on the direction of Inverse Government i.e., Inverse Government and Federated Government go up and down completely randomly.
Pair Corralation between Inverse Government and Federated Government
Assuming the 90 days horizon Inverse Government is expected to generate 4.13 times less return on investment than Federated Government. In addition to that, Inverse Government is 8.85 times more volatile than Federated Government Ultrashort. It trades about 0.01 of its total potential returns per unit of risk. Federated Government Ultrashort is currently generating about 0.19 per unit of volatility. If you would invest 954.00 in Federated Government Ultrashort on September 1, 2024 and sell it today you would earn a total of 23.00 from holding Federated Government Ultrashort or generate 2.41% 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. Federated Government Ultrashor
Performance |
| Timeline |
| Inverse Government Long |
| Federated Government |
Inverse Government and Federated Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Government and Federated Government
The main advantage of trading using opposite Inverse Government and Federated Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Government position performs unexpectedly, Federated 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 Federated Government will offset losses from the drop in Federated Government'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 |
| Federated Government vs. Federated Emerging Market | Federated Government vs. Federated Mdt All | Federated Government vs. Federated Mdt Balanced | Federated Government vs. Federated Global Allocation |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Commodity Directory Find actively traded commodities issued by global exchanges |