Correlation Between US Treasury and Stone Ridge

Can any of the company-specific risk be diversified away by investing in both US Treasury and Stone Ridge 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 US Treasury and Stone Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US Treasury 12 and Stone Ridge 2051, you can compare the effects of market volatilities on US Treasury and Stone Ridge 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 US Treasury with a short position of Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Treasury and Stone Ridge.

Diversification Opportunities for US Treasury and Stone Ridge

0.73

Correlation Coefficient

US Treasury  Stone Ridge

Poor diversification

The 3 months correlation between OBIL and Stone is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 12 and Stone Ridge 2051 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge 2051 and US Treasury 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 US Treasury 12 are associated (or correlated) with Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge 2051 has no effect on the direction of US Treasury i.e., US Treasury and Stone Ridge go up and down completely randomly.

Pair Corralation between US Treasury and Stone Ridge

Given the investment horizon of 90 days US Treasury is expected to generate 2.23 times less return on investment than Stone Ridge. But when comparing it to its historical volatility, US Treasury 12 is 13.53 times less risky than Stone Ridge. It trades about 0.45 of its potential returns per unit of risk. Stone Ridge 2051 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  13,041  in Stone Ridge 2051 on December 28, 2024 and sell it today you would earn a total of  279.00  from holding Stone Ridge 2051 or generate 2.14% return on investment over 90 days.

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

US Treasury 12  vs.  Stone Ridge 2051

US Treasury 12

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in US Treasury 12 are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, US Treasury is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Stone Ridge 2051

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge 2051 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Stone Ridge is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with US Treasury and Stone Ridge

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

The idea behind US Treasury 12 and Stone Ridge 2051 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.