Correlation Between Consumer Products and Inverse Government
Can any of the company-specific risk be diversified away by investing in both Consumer Products and Inverse 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 Consumer Products and Inverse Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumer Products Fund and Inverse Government Long, you can compare the effects of market volatilities on Consumer Products and Inverse 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 Consumer Products with a short position of Inverse Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Products and Inverse Government.
Diversification Opportunities for Consumer Products and Inverse Government
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Consumer and Inverse is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Products Fund and Inverse Government Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Government Long and Consumer Products 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 Consumer Products Fund are associated (or correlated) with Inverse Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Government Long has no effect on the direction of Consumer Products i.e., Consumer Products and Inverse Government go up and down completely randomly.
Pair Corralation between Consumer Products and Inverse Government
Assuming the 90 days horizon Consumer Products Fund is expected to generate 0.51 times more return on investment than Inverse Government. However, Consumer Products Fund is 1.97 times less risky than Inverse Government. It trades about 0.32 of its potential returns per unit of risk. Inverse Government Long is currently generating about -0.02 per unit of risk. If you would invest 4,206 in Consumer Products Fund on September 2, 2024 and sell it today you would earn a total of 155.00 from holding Consumer Products Fund or generate 3.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Products Fund vs. Inverse Government Long
Performance |
| Timeline |
| Consumer Products |
| Inverse Government Long |
Consumer Products and Inverse Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Products and Inverse Government
The main advantage of trading using opposite Consumer Products and Inverse Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Products position performs unexpectedly, Inverse 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 Inverse Government will offset losses from the drop in Inverse Government's long position.| Consumer Products vs. Basic Materials Fund | Consumer Products vs. Biotechnology Fund Class | Consumer Products vs. Consumer Products Fund | Consumer Products vs. Health Care Fund |
| Inverse Government vs. Volumetric Fund Volumetric | Inverse Government vs. Bbh Partner Fund | Inverse Government vs. Western Asset Municipal | Inverse Government vs. Aam Select 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Fundamental Analysis View fundamental data based on most recent published financial statements |