Correlation Between Alpine High and Government Securities

Can any of the company-specific risk be diversified away by investing in both Alpine High and Government Securities 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 Alpine High and Government Securities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alpine High Yield and Government Securities Fund, you can compare the effects of market volatilities on Alpine High and Government Securities 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 Alpine High with a short position of Government Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpine High and Government Securities.

Diversification Opportunities for Alpine High and Government Securities

-0.3

Correlation Coefficient

Alpine High  Government Securities

Very good diversification

The 3 months correlation between Alpine and Government is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Alpine High Yield and Government Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Securities and Alpine High 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 Alpine High Yield are associated (or correlated) with Government Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Securities has no effect on the direction of Alpine High i.e., Alpine High and Government Securities go up and down completely randomly.

Pair Corralation between Alpine High and Government Securities

Assuming the 90 days horizon Alpine High Yield is expected to generate 0.55 times more return on investment than Government Securities. However, Alpine High Yield is 1.82 times less risky than Government Securities. It trades about 0.13 of its potential returns per unit of risk. Government Securities Fund is currently generating about -0.08 per unit of risk. If you would invest  916.00  in Alpine High Yield on September 5, 2024 and sell it today you would earn a total of  12.00  from holding Alpine High Yield or generate 1.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Alpine High Yield  vs.  Government Securities Fund

Alpine High Yield

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alpine High Yield are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Alpine High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Government Securities Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Government Securities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alpine High and Government Securities

The main advantage of trading using opposite Alpine High and Government Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpine High position performs unexpectedly, Government Securities 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 Government Securities will offset losses from the drop in Government Securities' long position.

The idea behind Alpine High Yield and Government Securities Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.