Correlation Between Government Securities and Commodity Return
Can any of the company-specific risk be diversified away by investing in both Government Securities and Commodity Return 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 Commodity Return 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 Commodity Return Strategy, you can compare the effects of market volatilities on Government Securities and Commodity Return 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 Commodity Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of Government Securities and Commodity Return.
Diversification Opportunities for Government Securities and Commodity Return
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Government and Commodity is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Government Securities Fund and Commodity Return Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodity Return Strategy 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 Commodity Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodity Return Strategy has no effect on the direction of Government Securities i.e., Government Securities and Commodity Return go up and down completely randomly.
Pair Corralation between Government Securities and Commodity Return
Assuming the 90 days horizon Government Securities Fund is expected to generate 0.37 times more return on investment than Commodity Return. However, Government Securities Fund is 2.73 times less risky than Commodity Return. It trades about 0.1 of its potential returns per unit of risk. Commodity Return Strategy is currently generating about -0.03 per unit of risk. If you would invest 857.00 in Government Securities Fund on September 1, 2024 and sell it today you would earn a total of 29.00 from holding Government Securities Fund or generate 3.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Government Securities Fund vs. Commodity Return Strategy
Performance |
| Timeline |
| Government Securities |
| Commodity Return Strategy |
Government Securities and Commodity Return Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Government Securities and Commodity Return
The main advantage of trading using opposite Government Securities and Commodity Return positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Government Securities position performs unexpectedly, Commodity Return 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 Commodity Return will offset losses from the drop in Commodity Return's long position.| Government Securities vs. Capital Growth Fund | Government Securities vs. High Income Fund | Government Securities vs. International Fund International | Government Securities vs. Growth Income Fund |
| Commodity Return vs. Credit Suisse Floating | Commodity Return vs. Credit Suisse Floating | Commodity Return vs. Credit Suisse Modity | Commodity Return vs. Credit Suisse Modity |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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