Correlation Between Balanced Fund and Short-term Government
Can any of the company-specific risk be diversified away by investing in both Balanced Fund and Short-term 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 Balanced Fund and Short-term Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Fund Investor and Short Term Government Fund, you can compare the effects of market volatilities on Balanced Fund and Short-term 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 Balanced Fund with a short position of Short-term Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Short-term Government.
Diversification Opportunities for Balanced Fund and Short-term Government
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Balanced and Short-term is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Investor and Short Term Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Government and Balanced 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 Balanced Fund Investor are associated (or correlated) with Short-term Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Government has no effect on the direction of Balanced Fund i.e., Balanced Fund and Short-term Government go up and down completely randomly.
Pair Corralation between Balanced Fund and Short-term Government
Assuming the 90 days horizon Balanced Fund Investor is expected to generate 3.16 times more return on investment than Short-term Government. However, Balanced Fund is 3.16 times more volatile than Short Term Government Fund. It trades about 0.09 of its potential returns per unit of risk. Short Term Government Fund is currently generating about 0.08 per unit of risk. If you would invest 1,560 in Balanced Fund Investor on August 27, 2024 and sell it today you would earn a total of 444.00 from holding Balanced Fund Investor or generate 28.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Fund Investor vs. Short Term Government Fund
Performance |
| Timeline |
| Balanced Fund Investor |
| Short Term Government |
Balanced Fund and Short-term Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Fund and Short-term Government
The main advantage of trading using opposite Balanced Fund and Short-term Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund position performs unexpectedly, Short-term 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 Short-term Government will offset losses from the drop in Short-term Government's long position.| Balanced Fund vs. Select Fund Investor | Balanced Fund vs. Heritage Fund Investor | Balanced Fund vs. Value Fund Investor | Balanced Fund vs. Growth Fund Investor |
| Short-term Government vs. Mid Cap Value | Short-term Government vs. Equity Growth Fund | Short-term Government vs. Income Growth Fund | Short-term Government vs. Diversified Bond Fund |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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