Correlation Between International Government and Growth Income
Can any of the company-specific risk be diversified away by investing in both International Government and Growth 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 International Government and Growth Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Government Bond and Growth Income Fund, you can compare the effects of market volatilities on International Government and Growth 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 International Government with a short position of Growth Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Government and Growth Income.
Diversification Opportunities for International Government and Growth Income
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between International and Growth is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding International Government Bond and Growth Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Income and International 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 International Government Bond are associated (or correlated) with Growth Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Income has no effect on the direction of International Government i.e., International Government and Growth Income go up and down completely randomly.
Pair Corralation between International Government and Growth Income
Assuming the 90 days horizon International Government Bond is expected to under-perform the Growth Income. But the mutual fund apears to be less risky and, when comparing its historical volatility, International Government Bond is 2.35 times less risky than Growth Income. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Growth Income Fund is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 3,348 in Growth Income Fund on August 28, 2024 and sell it today you would earn a total of 138.00 from holding Growth Income Fund or generate 4.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Government Bond vs. Growth Income Fund
Performance |
| Timeline |
| International Government |
| Growth Income |
International Government and Growth Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Government and Growth Income
The main advantage of trading using opposite International Government and Growth Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Government position performs unexpectedly, Growth 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 Growth Income will offset losses from the drop in Growth Income's long position.| International Government vs. Mid Cap Index | International Government vs. Mid Cap Strategic | International Government vs. Valic Company I | International Government vs. Valic Company I |
| Growth Income vs. Counterpoint Tactical Municipal | Growth Income vs. Baird Strategic Municipal | Growth Income vs. Ishares Municipal Bond | Growth Income vs. Bbh Intermediate Municipal |
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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