Correlation Between Inverse Government and Financial Industries
Can any of the company-specific risk be diversified away by investing in both Inverse Government and Financial Industries 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 Financial Industries 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 Financial Industries Fund, you can compare the effects of market volatilities on Inverse Government and Financial Industries 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 Financial Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Government and Financial Industries.
Diversification Opportunities for Inverse Government and Financial Industries
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Inverse and Financial is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Government Long and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries 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 Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Inverse Government i.e., Inverse Government and Financial Industries go up and down completely randomly.
Pair Corralation between Inverse Government and Financial Industries
Assuming the 90 days horizon Inverse Government Long is expected to generate 0.61 times more return on investment than Financial Industries. However, Inverse Government Long is 1.65 times less risky than Financial Industries. It trades about 0.08 of its potential returns per unit of risk. Financial Industries Fund is currently generating about 0.05 per unit of risk. If you would invest 17,199 in Inverse Government Long on October 25, 2024 and sell it today you would earn a total of 1,480 from holding Inverse Government Long or generate 8.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Government Long vs. Financial Industries Fund
Performance |
| Timeline |
| Inverse Government Long |
| Financial Industries |
Inverse Government and Financial Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Government and Financial Industries
The main advantage of trading using opposite Inverse Government and Financial Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Government position performs unexpectedly, Financial Industries 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 Industries will offset losses from the drop in Financial Industries' long position.| Inverse Government vs. Tax Managed Large Cap | Inverse Government vs. T Rowe Price | Inverse Government vs. Alternative Asset Allocation | Inverse Government vs. Neiman Large Cap |
| Financial Industries vs. Amg Managers Centersquare | Financial Industries vs. Tiaa Cref Real Estate | Financial Industries vs. Commonwealth Real Estate | Financial Industries vs. Vanguard Reit Index |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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