Correlation Between Intermediate Government and Commodities Strategy

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

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

Diversification Opportunities for Intermediate Government and Commodities Strategy

0.52

Correlation Coefficient

Intermediate Government  Commodities Strategy

Very weak diversification

The 3 months correlation between Intermediate and Commodities is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Government Bond and Commodities Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodities Strategy and Intermediate 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 Intermediate Government Bond are associated (or correlated) with Commodities Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodities Strategy has no effect on the direction of Intermediate Government i.e., Intermediate Government and Commodities Strategy go up and down completely randomly.

Pair Corralation between Intermediate Government and Commodities Strategy

Assuming the 90 days horizon Intermediate Government is expected to generate 13.01 times less return on investment than Commodities Strategy. But when comparing it to its historical volatility, Intermediate Government Bond is 10.25 times less risky than Commodities Strategy. It trades about 0.12 of its potential returns per unit of risk. Commodities Strategy Fund is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,886  in Commodities Strategy Fund on October 26, 2024 and sell it today you would earn a total of  242.00  from holding Commodities Strategy Fund or generate 8.39% return on investment over 90 days.

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

Intermediate Government Bond  vs.  Commodities Strategy Fund

Intermediate Government

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Government Bond are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Intermediate Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Commodities Strategy

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commodities Strategy Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Commodities Strategy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Intermediate Government and Commodities Strategy

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

The idea behind Intermediate Government Bond and Commodities Strategy 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.