Correlation Between Coreshares Index and FNB Government

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

By analyzing existing cross correlation between Coreshares Index Tracker and FNB Government Inflation, you can compare the effects of market volatilities on Coreshares Index and FNB Government 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 Coreshares Index with a short position of FNB Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coreshares Index and FNB Government.

Diversification Opportunities for Coreshares Index and FNB Government

0.09

Correlation Coefficient

Coreshares Index  FNB Government

Significant diversification

The 3 months correlation between Coreshares and FNB is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Coreshares Index Tracker and FNB Government Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNB Government Inflation and Coreshares Index 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 Coreshares Index Tracker are associated (or correlated) with FNB Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNB Government Inflation has no effect on the direction of Coreshares Index i.e., Coreshares Index and FNB Government go up and down completely randomly.

Pair Corralation between Coreshares Index and FNB Government

Assuming the 90 days trading horizon Coreshares Index Tracker is expected to generate 2.43 times more return on investment than FNB Government. However, Coreshares Index is 2.43 times more volatile than FNB Government Inflation. It trades about 0.03 of its potential returns per unit of risk. FNB Government Inflation is currently generating about 0.06 per unit of risk. If you would invest  111,161  in Coreshares Index Tracker on December 25, 2024 and sell it today you would earn a total of  1,639  from holding Coreshares Index Tracker or generate 1.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Coreshares Index Tracker  vs.  FNB Government Inflation

Coreshares Index Tracker

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Coreshares Index Tracker are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Coreshares Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FNB Government Inflation

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FNB Government Inflation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, FNB Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coreshares Index and FNB Government

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

The idea behind Coreshares Index Tracker and FNB Government Inflation 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.