Correlation Between Government Securities and Global Managed

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

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

Diversification Opportunities for Government Securities and Global Managed

0.05

Correlation Coefficient

Government Securities  Global Managed

Significant diversification

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

Pair Corralation between Government Securities and Global Managed

Assuming the 90 days horizon Government Securities Fund is expected to generate 0.32 times more return on investment than Global Managed. However, Government Securities Fund is 3.09 times less risky than Global Managed. It trades about 0.2 of its potential returns per unit of risk. Global Managed Volatility is currently generating about -0.01 per unit of risk. If you would invest  863.00  in Government Securities Fund on December 23, 2024 and sell it today you would earn a total of  25.00  from holding Government Securities Fund or generate 2.9% return on investment over 90 days.

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

Government Securities Fund  vs.  Global Managed Volatility

Government Securities

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Government Securities Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Government Securities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Global Managed Volatility

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Government Securities and Global Managed

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

The idea behind Government Securities Fund and Global Managed Volatility 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.