Correlation Between Short-term Government and Global Small
Can any of the company-specific risk be diversified away by investing in both Short-term Government and Global Small 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 Short-term Government and Global Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Term Government Fund and Global Small Cap, you can compare the effects of market volatilities on Short-term Government and Global Small 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 Short-term Government with a short position of Global Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Government and Global Small.
Diversification Opportunities for Short-term Government and Global Small
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Short-term and Global is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund and Global Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Small Cap and Short-term 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 Short Term Government Fund are associated (or correlated) with Global Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Small Cap has no effect on the direction of Short-term Government i.e., Short-term Government and Global Small go up and down completely randomly.
Pair Corralation between Short-term Government and Global Small
Assuming the 90 days horizon Short-term Government is expected to generate 6.19 times less return on investment than Global Small. But when comparing it to its historical volatility, Short Term Government Fund is 6.26 times less risky than Global Small. It trades about 0.05 of its potential returns per unit of risk. Global Small Cap is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,561 in Global Small Cap on August 29, 2024 and sell it today you would earn a total of 435.00 from holding Global Small Cap or generate 27.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Term Government Fund vs. Global Small Cap
Performance |
| Timeline |
| Short Term Government |
| Global Small Cap |
Short-term Government and Global Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short-term Government and Global Small
The main advantage of trading using opposite Short-term Government and Global Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short-term Government position performs unexpectedly, Global Small 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 Global Small will offset losses from the drop in Global Small's long position.| Short-term Government vs. Vanguard Short Term Tax Exempt | Short-term Government vs. HUMANA INC | Short-term Government vs. Aquagold International | Short-term Government vs. Barloworld Ltd ADR |
| Global Small vs. Invesco Gold Special | Global Small vs. Gabelli Gold Fund | Global Small vs. Oppenheimer Gold Special | Global Small vs. Fidelity Advisor Gold |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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