Correlation Between US Treasury and US Treasury
Can any of the company-specific risk be diversified away by investing in both US Treasury and US Treasury 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 Treasury and US Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Treasury 3 and US Treasury 20, you can compare the effects of market volatilities on US Treasury and US Treasury 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 Treasury with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Treasury and US Treasury.
Diversification Opportunities for US Treasury and US Treasury
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between UTRE and UTWY is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 3 and US Treasury 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 20 and US Treasury 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 Treasury 3 are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 20 has no effect on the direction of US Treasury i.e., US Treasury and US Treasury go up and down completely randomly.
Pair Corralation between US Treasury and US Treasury
Given the investment horizon of 90 days US Treasury is expected to generate 12.93 times less return on investment than US Treasury. But when comparing it to its historical volatility, US Treasury 3 is 5.54 times less risky than US Treasury. It trades about 0.03 of its potential returns per unit of risk. US Treasury 20 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,486 in US Treasury 20 on August 29, 2024 and sell it today you would earn a total of 57.00 from holding US Treasury 20 or generate 1.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Treasury 3 vs. US Treasury 20
Performance |
| Timeline |
| US Treasury 3 |
| US Treasury 20 |
US Treasury and US Treasury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Treasury and US Treasury
The main advantage of trading using opposite US Treasury and US Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Treasury position performs unexpectedly, US Treasury 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 US Treasury will offset losses from the drop in US Treasury's long position.| US Treasury vs. US Treasury 5 | US Treasury vs. US Treasury 30 | US Treasury vs. US Treasury 7 | US Treasury vs. US Treasury 20 |
| US Treasury vs. US Treasury 30 | US Treasury vs. US Treasury 5 | US Treasury vs. US Treasury 7 | US Treasury vs. US Treasury 3 |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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