Correlation Between Equity Income and Us Government
Can any of the company-specific risk be diversified away by investing in both Equity Income and Us 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 Equity Income and Us Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Income Fund and Us Government Securities, you can compare the effects of market volatilities on Equity Income and Us 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 Equity Income with a short position of Us Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Income and Us Government.
Diversification Opportunities for Equity Income and Us Government
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Equity and USGFX is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Equity Income Fund and Us Government Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Government Securities and Equity Income 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 Equity Income Fund are associated (or correlated) with Us Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Government Securities has no effect on the direction of Equity Income i.e., Equity Income and Us Government go up and down completely randomly.
Pair Corralation between Equity Income and Us Government
Assuming the 90 days horizon Equity Income Fund is expected to generate 1.53 times more return on investment than Us Government. However, Equity Income is 1.53 times more volatile than Us Government Securities. It trades about 0.18 of its potential returns per unit of risk. Us Government Securities is currently generating about 0.07 per unit of risk. If you would invest 866.00 in Equity Income Fund on September 3, 2024 and sell it today you would earn a total of 101.00 from holding Equity Income Fund or generate 11.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Income Fund vs. Us Government Securities
Performance |
| Timeline |
| Equity Income |
| Us Government Securities |
Equity Income and Us Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Income and Us Government
The main advantage of trading using opposite Equity Income and Us Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Income position performs unexpectedly, Us 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 Us Government will offset losses from the drop in Us Government's long position.| Equity Income vs. Us Government Securities | Equity Income vs. Inverse Government Long | Equity Income vs. Us Government Securities | Equity Income vs. Prudential Government Income |
| Us Government vs. Aig Government Money | Us Government vs. John Hancock Government | Us Government vs. Fidelity Series Government | Us Government vs. Us Government Securities |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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