Correlation Between Target Retirement and Government Securities
Can any of the company-specific risk be diversified away by investing in both Target Retirement and Government Securities 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 Target Retirement and Government Securities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target Retirement 2040 and Government Securities Fund, you can compare the effects of market volatilities on Target Retirement and Government Securities 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 Target Retirement with a short position of Government Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Retirement and Government Securities.
Diversification Opportunities for Target Retirement and Government Securities
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Target and Government is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Target Retirement 2040 and Government Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Securities and Target Retirement 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 Target Retirement 2040 are associated (or correlated) with Government Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Securities has no effect on the direction of Target Retirement i.e., Target Retirement and Government Securities go up and down completely randomly.
Pair Corralation between Target Retirement and Government Securities
Assuming the 90 days horizon Target Retirement is expected to generate 2.77 times less return on investment than Government Securities. In addition to that, Target Retirement is 1.95 times more volatile than Government Securities Fund. It trades about 0.06 of its total potential returns per unit of risk. Government Securities Fund is currently generating about 0.35 per unit of volatility. If you would invest 875.00 in Government Securities Fund on December 4, 2024 and sell it today you would earn a total of 16.00 from holding Government Securities Fund or generate 1.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Target Retirement 2040 vs. Government Securities Fund
Performance |
| Timeline |
| Target Retirement 2040 |
| Government Securities |
Target Retirement and Government Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target Retirement and Government Securities
The main advantage of trading using opposite Target Retirement and Government Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Retirement position performs unexpectedly, Government Securities 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 Government Securities will offset losses from the drop in Government Securities' long position.| Target Retirement vs. Nt International Small Mid | Target Retirement vs. Champlain Small | Target Retirement vs. Glg Intl Small | Target Retirement vs. United Kingdom Small |
| Government Securities vs. Tfa Alphagen Growth | Government Securities vs. Ft 7934 Corporate | Government Securities vs. Scharf Global Opportunity | Government Securities vs. Victory Incore Fund |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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