Correlation Between Inverse Government and Eic Value

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

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

Diversification Opportunities for Inverse Government and Eic Value

-0.71

Correlation Coefficient

Inverse Government  Eic Value

Pay attention - limited upside

The 3 months correlation between Inverse and Eic is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Government Long and Eic Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eic Value Fund and Inverse 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 Inverse Government Long are associated (or correlated) with Eic Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eic Value Fund has no effect on the direction of Inverse Government i.e., Inverse Government and Eic Value go up and down completely randomly.

Pair Corralation between Inverse Government and Eic Value

Assuming the 90 days horizon Inverse Government is expected to generate 2.54 times less return on investment than Eic Value. But when comparing it to its historical volatility, Inverse Government Long is 1.07 times less risky than Eic Value. It trades about 0.09 of its potential returns per unit of risk. Eic Value Fund is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,689  in Eic Value Fund on October 25, 2024 and sell it today you would earn a total of  47.00  from holding Eic Value Fund or generate 2.78% return on investment over 90 days.

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

Inverse Government Long  vs.  Eic Value Fund

Inverse Government Long

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Government Long are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Inverse Government may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Eic Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Inverse Government and Eic Value

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

The idea behind Inverse Government Long and Eic Value 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.