Correlation Between Us Government and Credit Suisse

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

By analyzing existing cross correlation between Us Government Securities and Credit Suisse Managed, you can compare the effects of market volatilities on Us Government and Credit Suisse 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 Us Government with a short position of Credit Suisse. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Credit Suisse.

Diversification Opportunities for Us Government and Credit Suisse

0.05

Correlation Coefficient

Us Government  Credit Suisse

Significant diversification

The 3 months correlation between UGSFX and Credit is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and Credit Suisse Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Suisse Managed and Us 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 Us Government Securities are associated (or correlated) with Credit Suisse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Suisse Managed has no effect on the direction of Us Government i.e., Us Government and Credit Suisse go up and down completely randomly.

Pair Corralation between Us Government and Credit Suisse

Assuming the 90 days horizon Us Government Securities is expected to generate 0.47 times more return on investment than Credit Suisse. However, Us Government Securities is 2.11 times less risky than Credit Suisse. It trades about 0.15 of its potential returns per unit of risk. Credit Suisse Managed is currently generating about 0.03 per unit of risk. If you would invest  1,164  in Us Government Securities on December 29, 2024 and sell it today you would earn a total of  35.00  from holding Us Government Securities or generate 3.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Us Government Securities  vs.  Credit Suisse Managed

Us Government Securities

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Us Government Securities are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Us Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Credit Suisse Managed

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Suisse Managed are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Credit Suisse is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Us Government and Credit Suisse

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

The idea behind Us Government Securities and Credit Suisse Managed 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.