Correlation Between Short-term Government and Federated Government
Can any of the company-specific risk be diversified away by investing in both Short-term Government and Federated 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 Short-term Government and Federated Government 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 Federated Government Ultrashort, you can compare the effects of market volatilities on Short-term Government and Federated 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 Short-term Government with a short position of Federated Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Government and Federated Government.
Diversification Opportunities for Short-term Government and Federated Government
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Short-term and Federated is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund and Federated Government Ultrashor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Government 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 Federated Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Government has no effect on the direction of Short-term Government i.e., Short-term Government and Federated Government go up and down completely randomly.
Pair Corralation between Short-term Government and Federated Government
Assuming the 90 days horizon Short Term Government Fund is expected to under-perform the Federated Government. In addition to that, Short-term Government is 2.62 times more volatile than Federated Government Ultrashort. It trades about -0.05 of its total potential returns per unit of risk. Federated Government Ultrashort is currently generating about 0.12 per unit of volatility. If you would invest 976.00 in Federated Government Ultrashort on September 1, 2024 and sell it today you would earn a total of 1.00 from holding Federated Government Ultrashort or generate 0.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Term Government Fund vs. Federated Government Ultrashor
Performance |
| Timeline |
| Short Term Government |
| Federated Government |
Short-term Government and Federated Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short-term Government and Federated Government
The main advantage of trading using opposite Short-term Government and Federated Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short-term Government position performs unexpectedly, Federated 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 Federated Government will offset losses from the drop in Federated Government's long position.| Short-term Government vs. T Rowe Price | Short-term Government vs. Dodge Global Stock | Short-term Government vs. Ms Global Fixed | Short-term Government vs. Us Global Leaders |
| Federated Government vs. Federated Emerging Market | Federated Government vs. Federated Mdt All | Federated Government vs. Federated Mdt Balanced | Federated Government vs. Federated Global Allocation |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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