Correlation Between Short-term Government and Pacific Funds
Can any of the company-specific risk be diversified away by investing in both Short-term Government and Pacific Funds 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 Pacific Funds 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 Pacific Funds Strategic, you can compare the effects of market volatilities on Short-term Government and Pacific Funds 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 Pacific Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Government and Pacific Funds.
Diversification Opportunities for Short-term Government and Pacific Funds
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Short-term and Pacific is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund and Pacific Funds Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Funds Strategic 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 Pacific Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Funds Strategic has no effect on the direction of Short-term Government i.e., Short-term Government and Pacific Funds go up and down completely randomly.
Pair Corralation between Short-term Government and Pacific Funds
Assuming the 90 days horizon Short-term Government is expected to generate 1.52 times less return on investment than Pacific Funds. But when comparing it to its historical volatility, Short Term Government Fund is 1.15 times less risky than Pacific Funds. It trades about 0.13 of its potential returns per unit of risk. Pacific Funds Strategic is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,019 in Pacific Funds Strategic on September 1, 2024 and sell it today you would earn a total of 34.00 from holding Pacific Funds Strategic or generate 3.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Short Term Government Fund vs. Pacific Funds Strategic
Performance |
| Timeline |
| Short Term Government |
| Pacific Funds Strategic |
Short-term Government and Pacific Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short-term Government and Pacific Funds
The main advantage of trading using opposite Short-term Government and Pacific Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short-term Government position performs unexpectedly, Pacific Funds 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 Pacific Funds will offset losses from the drop in Pacific Funds' 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 |
| Pacific Funds vs. T Rowe Price | Pacific Funds vs. Multisector Bond Sma | Pacific Funds vs. Transamerica Intermediate Muni | Pacific Funds vs. Maryland Tax Free Bond |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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