Correlation Between 30 Year and Class III
Can any of the company-specific risk be diversified away by investing in both 30 Year and Class III 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 30 Year and Class III into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 30 Year Treasury and Class III Milk, you can compare the effects of market volatilities on 30 Year and Class III 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 30 Year with a short position of Class III. Check out your portfolio center. Please also check ongoing floating volatility patterns of 30 Year and Class III.
Diversification Opportunities for 30 Year and Class III
Poor diversification
The 3 months correlation between ZBUSD and Class is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding 30 Year Treasury and Class III Milk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Class III Milk and 30 Year 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 30 Year Treasury are associated (or correlated) with Class III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Class III Milk has no effect on the direction of 30 Year i.e., 30 Year and Class III go up and down completely randomly.
Pair Corralation between 30 Year and Class III
Assuming the 90 days horizon 30 Year Treasury is expected to generate 1.46 times more return on investment than Class III. However, 30 Year is 1.46 times more volatile than Class III Milk. It trades about -0.03 of its potential returns per unit of risk. Class III Milk is currently generating about -0.14 per unit of risk. If you would invest 11,766 in 30 Year Treasury on August 28, 2024 and sell it today you would lose (50.00) from holding 30 Year Treasury or give up 0.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
30 Year Treasury vs. Class III Milk
Performance |
| Timeline |
| 30 Year Treasury |
| Class III Milk |
30 Year and Class III Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 30 Year and Class III
The main advantage of trading using opposite 30 Year and Class III positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 30 Year position performs unexpectedly, Class III 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 Class III will offset losses from the drop in Class III's long position.| 30 Year vs. 2 Year T Note Futures | 30 Year vs. Heating Oil | 30 Year vs. Crude Oil | 30 Year vs. Aluminum Futures |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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