Correlation Between Us Government and Frost Low
Can any of the company-specific risk be diversified away by investing in both Us Government and Frost Low 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 Us Government and Frost Low into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Government Securities and Frost Low Duration, you can compare the effects of market volatilities on Us Government and Frost Low 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 Us Government with a short position of Frost Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Frost Low.
Diversification Opportunities for Us Government and Frost Low
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between USGFX and Frost is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and Frost Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frost Low Duration and Us Government 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 Us Government Securities are associated (or correlated) with Frost Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frost Low Duration has no effect on the direction of Us Government i.e., Us Government and Frost Low go up and down completely randomly.
Pair Corralation between Us Government and Frost Low
Assuming the 90 days horizon Us Government is expected to generate 2.26 times less return on investment than Frost Low. In addition to that, Us Government is 2.98 times more volatile than Frost Low Duration. It trades about 0.02 of its total potential returns per unit of risk. Frost Low Duration is currently generating about 0.14 per unit of volatility. If you would invest 895.00 in Frost Low Duration on November 30, 2024 and sell it today you would earn a total of 94.00 from holding Frost Low Duration or generate 10.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Government Securities vs. Frost Low Duration
Performance |
| Timeline |
| Us Government Securities |
| Frost Low Duration |
Us Government and Frost Low Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and Frost Low
The main advantage of trading using opposite Us Government and Frost Low positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government position performs unexpectedly, Frost Low 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 Frost Low will offset losses from the drop in Frost Low's long position.| Us Government vs. Ashmore Emerging Markets | Us Government vs. Astoncrosswind Small Cap | Us Government vs. Ab Small Cap | Us Government vs. Franklin Small Cap |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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