Correlation Between Government Securities and Pacific Funds
Can any of the company-specific risk be diversified away by investing in both Government Securities 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 Government Securities and Pacific Funds 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 Pacific Funds Portfolio, you can compare the effects of market volatilities on Government Securities 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 Government Securities with a short position of Pacific Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Government Securities and Pacific Funds.
Diversification Opportunities for Government Securities and Pacific Funds
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Government and Pacific is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Government Securities Fund and Pacific Funds Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Funds Portfolio 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 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 Portfolio has no effect on the direction of Government Securities i.e., Government Securities and Pacific Funds go up and down completely randomly.
Pair Corralation between Government Securities and Pacific Funds
Assuming the 90 days horizon Government Securities is expected to generate 4.38 times less return on investment than Pacific Funds. But when comparing it to its historical volatility, Government Securities Fund is 1.74 times less risky than Pacific Funds. It trades about 0.04 of its potential returns per unit of risk. Pacific Funds Portfolio is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 992.00 in Pacific Funds Portfolio on August 30, 2024 and sell it today you would earn a total of 328.00 from holding Pacific Funds Portfolio or generate 33.06% 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. Pacific Funds Portfolio
Performance |
| Timeline |
| Government Securities |
| Pacific Funds Portfolio |
Government Securities and Pacific Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Government Securities and Pacific Funds
The main advantage of trading using opposite Government Securities and Pacific Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Government Securities 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.The idea behind Government Securities Fund and Pacific Funds Portfolio pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Pacific Funds vs. Short Term Government Fund | Pacific Funds vs. Government Securities Fund | Pacific Funds vs. Blackrock Government Bond | Pacific Funds vs. Inverse Government Long |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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