Correlation Between Inverse Government and Aim Investment
Can any of the company-specific risk be diversified away by investing in both Inverse Government and Aim Investment 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 Aim Investment 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 Aim Investment Secs, you can compare the effects of market volatilities on Inverse Government and Aim Investment 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 Aim Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Government and Aim Investment.
Diversification Opportunities for Inverse Government and Aim Investment
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Inverse and Aim is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Government Long and Aim Investment Secs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aim Investment Secs 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 Aim Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aim Investment Secs has no effect on the direction of Inverse Government i.e., Inverse Government and Aim Investment go up and down completely randomly.
Pair Corralation between Inverse Government and Aim Investment
Assuming the 90 days horizon Inverse Government Long is expected to generate 5.36 times more return on investment than Aim Investment. However, Inverse Government is 5.36 times more volatile than Aim Investment Secs. It trades about 0.24 of its potential returns per unit of risk. Aim Investment Secs is currently generating about 0.15 per unit of risk. If you would invest 17,954 in Inverse Government Long on August 27, 2024 and sell it today you would earn a total of 1,572 from holding Inverse Government Long or generate 8.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Government Long vs. Aim Investment Secs
Performance |
| Timeline |
| Inverse Government Long |
| Aim Investment Secs |
Inverse Government and Aim Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Government and Aim Investment
The main advantage of trading using opposite Inverse Government and Aim Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Government position performs unexpectedly, Aim Investment 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 Aim Investment will offset losses from the drop in Aim Investment's long position.The idea behind Inverse Government Long and Aim Investment Secs pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Aim Investment vs. Vanguard Short Term Government | Aim Investment vs. Inverse Government Long | Aim Investment vs. Fidelity Series Government | Aim Investment vs. Ab Government Exchange |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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