Correlation Between Inverse Government and Growth Strategy
Can any of the company-specific risk be diversified away by investing in both Inverse Government and Growth 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 Inverse Government and Growth Strategy 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 Growth Strategy Fund, you can compare the effects of market volatilities on Inverse Government and Growth 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 Inverse Government with a short position of Growth Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Government and Growth Strategy.
Diversification Opportunities for Inverse Government and Growth Strategy
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Inverse and Growth is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Government Long and Growth Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Strategy 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 Growth Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Strategy has no effect on the direction of Inverse Government i.e., Inverse Government and Growth Strategy go up and down completely randomly.
Pair Corralation between Inverse Government and Growth Strategy
Assuming the 90 days horizon Inverse Government Long is expected to generate 2.57 times more return on investment than Growth Strategy. However, Inverse Government is 2.57 times more volatile than Growth Strategy Fund. It trades about -0.07 of its potential returns per unit of risk. Growth Strategy Fund is currently generating about -0.19 per unit of risk. If you would invest 19,039 in Inverse Government Long on September 25, 2024 and sell it today you would lose (504.00) from holding Inverse Government Long or give up 2.65% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 95.24% |
Values | Daily Returns |
Inverse Government Long vs. Growth Strategy Fund
Performance |
Timeline |
Inverse Government Long |
Growth Strategy |
Inverse Government and Growth Strategy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Inverse Government and Growth Strategy
The main advantage of trading using opposite Inverse Government and Growth Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Government position performs unexpectedly, Growth 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 Growth Strategy will offset losses from the drop in Growth Strategy's long position.Inverse Government vs. Basic Materials Fund | Inverse Government vs. Basic Materials Fund | Inverse Government vs. Banking Fund Class | Inverse Government vs. Basic Materials Fund |
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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