Correlation Between Banking Fund and Government Long
Can any of the company-specific risk be diversified away by investing in both Banking Fund and Government Long 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 Banking Fund and Government Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banking Fund Class and Government Long Bond, you can compare the effects of market volatilities on Banking Fund and Government Long 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 Banking Fund with a short position of Government Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banking Fund and Government Long.
Diversification Opportunities for Banking Fund and Government Long
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Banking and Government is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Banking Fund Class and Government Long Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Long Bond and Banking 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 Banking Fund Class are associated (or correlated) with Government Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Long Bond has no effect on the direction of Banking Fund i.e., Banking Fund and Government Long go up and down completely randomly.
Pair Corralation between Banking Fund and Government Long
Assuming the 90 days horizon Banking Fund Class is expected to generate 1.32 times more return on investment than Government Long. However, Banking Fund is 1.32 times more volatile than Government Long Bond. It trades about 0.11 of its potential returns per unit of risk. Government Long Bond is currently generating about 0.0 per unit of risk. If you would invest 6,833 in Banking Fund Class on August 27, 2024 and sell it today you would earn a total of 3,191 from holding Banking Fund Class or generate 46.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banking Fund Class vs. Government Long Bond
Performance |
| Timeline |
| Banking Fund Class |
| Government Long Bond |
Banking Fund and Government Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banking Fund and Government Long
The main advantage of trading using opposite Banking Fund and Government Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banking Fund position performs unexpectedly, Government Long 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 Government Long will offset losses from the drop in Government Long's long position.| Banking Fund vs. Financial Services Fund | Banking Fund vs. Health Care Fund | Banking Fund vs. Retailing Fund Investor | Banking Fund vs. Technology Fund Investor |
| Government Long vs. Franklin High Yield | Government Long vs. Pace Municipal Fixed | Government Long vs. T Rowe Price | Government Long vs. Artisan High Income |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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