Correlation Between Government Securities and High Income
Can any of the company-specific risk be diversified away by investing in both Government Securities and High Income 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 High Income 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 High Income Fund, you can compare the effects of market volatilities on Government Securities and High Income 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 High Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Government Securities and High Income.
Diversification Opportunities for Government Securities and High Income
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Government and High is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Government Securities Fund and High Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Income Fund 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 High Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Income Fund has no effect on the direction of Government Securities i.e., Government Securities and High Income go up and down completely randomly.
Pair Corralation between Government Securities and High Income
Assuming the 90 days horizon Government Securities Fund is expected to generate 1.52 times more return on investment than High Income. However, Government Securities is 1.52 times more volatile than High Income Fund. It trades about 0.27 of its potential returns per unit of risk. High Income Fund is currently generating about 0.28 per unit of risk. If you would invest 866.00 in Government Securities Fund on November 8, 2024 and sell it today you would earn a total of 13.00 from holding Government Securities Fund or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Government Securities Fund vs. High Income Fund
Performance |
| Timeline |
| Government Securities |
| High Income Fund |
Government Securities and High Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Government Securities and High Income
The main advantage of trading using opposite Government Securities and High Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Government Securities position performs unexpectedly, High Income 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 High Income will offset losses from the drop in High Income's long position.| Government Securities vs. Davis Government Bond | Government Securities vs. Hsbc Government Money | Government Securities vs. Us Government Securities | Government Securities vs. Virtus Seix Government |
| High Income vs. The Hartford Healthcare | High Income vs. Highland Longshort Healthcare | High Income vs. Baillie Gifford Health | High Income vs. Eventide Healthcare Life |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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