Correlation Between Short Term and Regional Bank
Can any of the company-specific risk be diversified away by investing in both Short Term and Regional Bank 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 Short Term and Regional Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Term Government Fund and Regional Bank Fund, you can compare the effects of market volatilities on Short Term and Regional Bank 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 Short Term with a short position of Regional Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Term and Regional Bank.
Diversification Opportunities for Short Term and Regional Bank
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Short and Regional is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund and Regional Bank Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Bank and Short Term 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 Short Term Government Fund are associated (or correlated) with Regional Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Bank has no effect on the direction of Short Term i.e., Short Term and Regional Bank go up and down completely randomly.
Pair Corralation between Short Term and Regional Bank
Assuming the 90 days horizon Short Term Government Fund is expected to generate 0.04 times more return on investment than Regional Bank. However, Short Term Government Fund is 23.61 times less risky than Regional Bank. It trades about -0.07 of its potential returns per unit of risk. Regional Bank Fund is currently generating about -0.5 per unit of risk. If you would invest 893.00 in Short Term Government Fund on September 24, 2024 and sell it today you would lose (1.00) from holding Short Term Government Fund or give up 0.11% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Short Term Government Fund vs. Regional Bank Fund
Performance |
Timeline |
Short Term Government |
Regional Bank |
Short Term and Regional Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Short Term and Regional Bank
The main advantage of trading using opposite Short Term and Regional Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Term position performs unexpectedly, Regional Bank 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 Regional Bank will offset losses from the drop in Regional Bank's long position.Short Term vs. Mid Cap Value | Short Term vs. Equity Growth Fund | Short Term vs. Income Growth Fund | Short Term vs. Diversified Bond Fund |
Regional Bank vs. Us Government Securities | Regional Bank vs. Sit Government Securities | Regional Bank vs. Short Term Government Fund | Regional Bank vs. Intermediate Government Bond |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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