Correlation Between Five Year and Class III
Can any of the company-specific risk be diversified away by investing in both Five 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 Five 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 Five Year Treasury Note and Class III Milk, you can compare the effects of market volatilities on Five 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 Five Year with a short position of Class III. Check out your portfolio center. Please also check ongoing floating volatility patterns of Five Year and Class III.
Diversification Opportunities for Five Year and Class III
Poor diversification
The 3 months correlation between Five and Class is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Five Year Treasury Note 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 Five 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 Five Year Treasury Note 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 Five Year i.e., Five Year and Class III go up and down completely randomly.
Pair Corralation between Five Year and Class III
Assuming the 90 days horizon Five Year is expected to generate 86.13 times less return on investment than Class III. But when comparing it to its historical volatility, Five Year Treasury Note is 8.23 times less risky than Class III. It trades about 0.01 of its potential returns per unit of risk. Class III Milk is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,611 in Class III Milk on August 25, 2024 and sell it today you would earn a total of 376.00 from holding Class III Milk or generate 23.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.45% |
| Values | Daily Returns |
Five Year Treasury Note vs. Class III Milk
Performance |
| Timeline |
| Five Year Treasury |
| Class III Milk |
Five Year and Class III Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Five Year and Class III
The main advantage of trading using opposite Five Year and Class III positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five 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.| Five Year vs. Heating Oil | Five Year vs. Cotton | Five Year vs. Mini Dow Jones | Five Year vs. Class III Milk |
| Class III vs. 30 Day Fed | Class III vs. US Dollar | Class III vs. 2 Year T Note Futures | Class III vs. Brent Crude Oil |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |