Correlation Between Government Securities and Absolute Convertible
Can any of the company-specific risk be diversified away by investing in both Government Securities and Absolute Convertible 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 Government Securities and Absolute Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Government Securities Fund and Absolute Convertible Arbitrage, you can compare the effects of market volatilities on Government Securities and Absolute Convertible 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 Government Securities with a short position of Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Government Securities and Absolute Convertible.
Diversification Opportunities for Government Securities and Absolute Convertible
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Government and Absolute is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Government Securities Fund and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible and Government Securities 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 Government Securities Fund are associated (or correlated) with Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of Government Securities i.e., Government Securities and Absolute Convertible go up and down completely randomly.
Pair Corralation between Government Securities and Absolute Convertible
Assuming the 90 days horizon Government Securities is expected to generate 1.85 times less return on investment than Absolute Convertible. In addition to that, Government Securities is 5.45 times more volatile than Absolute Convertible Arbitrage. It trades about 0.04 of its total potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about 0.37 per unit of volatility. If you would invest 1,020 in Absolute Convertible Arbitrage on September 3, 2024 and sell it today you would earn a total of 130.00 from holding Absolute Convertible Arbitrage or generate 12.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Government Securities Fund vs. Absolute Convertible Arbitrage
Performance |
| Timeline |
| Government Securities |
| Absolute Convertible |
Government Securities and Absolute Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Government Securities and Absolute Convertible
The main advantage of trading using opposite Government Securities and Absolute Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Government Securities position performs unexpectedly, Absolute Convertible 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 Absolute Convertible will offset losses from the drop in Absolute Convertible's long position.| Government Securities vs. T Rowe Price | Government Securities vs. T Rowe Price | Government Securities vs. T Rowe Price | Government Securities vs. T Rowe Price |
| Absolute Convertible vs. Dunham Porategovernment Bond | Absolute Convertible vs. John Hancock Government | Absolute Convertible vs. Government Securities Fund | Absolute Convertible vs. Ab Government Exchange |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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