Correlation Between Us Government and Floating Rate
Can any of the company-specific risk be diversified away by investing in both Us Government and Floating Rate 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 Floating Rate 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 Floating Rate Fund, you can compare the effects of market volatilities on Us Government and Floating Rate 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 Floating Rate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Floating Rate.
Diversification Opportunities for Us Government and Floating Rate
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between USGFX and Floating is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and Floating Rate Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floating Rate 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 Floating Rate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Floating Rate has no effect on the direction of Us Government i.e., Us Government and Floating Rate go up and down completely randomly.
Pair Corralation between Us Government and Floating Rate
Assuming the 90 days horizon Us Government is expected to generate 1.07 times less return on investment than Floating Rate. In addition to that, Us Government is 2.19 times more volatile than Floating Rate Fund. It trades about 0.11 of its total potential returns per unit of risk. Floating Rate Fund is currently generating about 0.25 per unit of volatility. If you would invest 811.00 in Floating Rate Fund on October 31, 2024 and sell it today you would earn a total of 6.00 from holding Floating Rate Fund or generate 0.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Government Securities vs. Floating Rate Fund
Performance |
| Timeline |
| Us Government Securities |
| Floating Rate |
Us Government and Floating Rate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and Floating Rate
The main advantage of trading using opposite Us Government and Floating Rate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government position performs unexpectedly, Floating Rate 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 Floating Rate will offset losses from the drop in Floating Rate's long position.| Us Government vs. Health Care Fund | Us Government vs. Highland Longshort Healthcare | Us Government vs. Live Oak Health | Us Government vs. The Hartford Healthcare |
| Floating Rate vs. Retirement Living Through | Floating Rate vs. Moderate Balanced Allocation | Floating Rate vs. Putnman Retirement Ready | Floating Rate vs. Franklin Lifesmart Retirement |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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