Correlation Between Real Return and Gnma Fund

Can any of the company-specific risk be diversified away by investing in both Real Return and Gnma Fund 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 Real Return and Gnma Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Real Return Fund and Gnma Fund Institutional, you can compare the effects of market volatilities on Real Return and Gnma Fund 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 Real Return with a short position of Gnma Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Return and Gnma Fund.

Diversification Opportunities for Real Return and Gnma Fund

0.93

Correlation Coefficient

Real Return  Gnma Fund

Almost no diversification

The 3 months correlation between Real and Gnma is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Real Return Fund and Gnma Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gnma Fund Institutional and Real Return 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 Real Return Fund are associated (or correlated) with Gnma Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gnma Fund Institutional has no effect on the direction of Real Return i.e., Real Return and Gnma Fund go up and down completely randomly.

Pair Corralation between Real Return and Gnma Fund

Assuming the 90 days horizon Real Return Fund is expected to generate 0.8 times more return on investment than Gnma Fund. However, Real Return Fund is 1.25 times less risky than Gnma Fund. It trades about 0.04 of its potential returns per unit of risk. Gnma Fund Institutional is currently generating about 0.02 per unit of risk. If you would invest  976.00  in Real Return Fund on September 20, 2024 and sell it today you would earn a total of  30.00  from holding Real Return Fund or generate 3.07% return on investment over 90 days.

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

Real Return Fund  vs.  Gnma Fund Institutional

Real Return Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gnma Fund Institutional

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Real Return and Gnma Fund

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

The idea behind Real Return Fund and Gnma Fund Institutional 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.