Correlation Between Short-term Government and Blackrock Lifepath

Can any of the company-specific risk be diversified away by investing in both Short-term Government and Blackrock Lifepath 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 Government and Blackrock Lifepath 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 Blackrock Lifepath Idx, you can compare the effects of market volatilities on Short-term Government and Blackrock Lifepath 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 Government with a short position of Blackrock Lifepath. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Government and Blackrock Lifepath.

Diversification Opportunities for Short-term Government and Blackrock Lifepath

-0.12

Correlation Coefficient

Short-term Government  Blackrock Lifepath

Good diversification

The 3 months correlation between Short-term and Blackrock is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund and Blackrock Lifepath Idx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Lifepath Idx and Short-term 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 Short Term Government Fund are associated (or correlated) with Blackrock Lifepath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Lifepath Idx has no effect on the direction of Short-term Government i.e., Short-term Government and Blackrock Lifepath go up and down completely randomly.

Pair Corralation between Short-term Government and Blackrock Lifepath

Assuming the 90 days horizon Short Term Government Fund is expected to generate 0.13 times more return on investment than Blackrock Lifepath. However, Short Term Government Fund is 7.47 times less risky than Blackrock Lifepath. It trades about 0.22 of its potential returns per unit of risk. Blackrock Lifepath Idx is currently generating about -0.01 per unit of risk. If you would invest  896.00  in Short Term Government Fund on December 23, 2024 and sell it today you would earn a total of  14.00  from holding Short Term Government Fund or generate 1.56% return on investment over 90 days.

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

Short Term Government Fund  vs.  Blackrock Lifepath Idx

Short Term Government

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Government Fund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Short-term Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Lifepath Idx

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Short-term Government and Blackrock Lifepath

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

The idea behind Short Term Government Fund and Blackrock Lifepath Idx 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.