Correlation Between Us Government and Quantitative

Can any of the company-specific risk be diversified away by investing in both Us Government and Quantitative 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 Quantitative 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 Quantitative Longshort Equity, you can compare the effects of market volatilities on Us Government and Quantitative 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 Quantitative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Quantitative.

Diversification Opportunities for Us Government and Quantitative

-0.36

Correlation Coefficient

Us Government  Quantitative

Very good diversification

The 3 months correlation between USGFX and Quantitative is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and Quantitative Longshort Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantitative Longshort 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 Quantitative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantitative Longshort has no effect on the direction of Us Government i.e., Us Government and Quantitative go up and down completely randomly.

Pair Corralation between Us Government and Quantitative

Assuming the 90 days horizon Us Government Securities is expected to generate 0.78 times more return on investment than Quantitative. However, Us Government Securities is 1.28 times less risky than Quantitative. It trades about 0.15 of its potential returns per unit of risk. Quantitative Longshort Equity is currently generating about 0.01 per unit of risk. If you would invest  1,158  in Us Government Securities on December 24, 2024 and sell it today you would earn a total of  35.00  from holding Us Government Securities or generate 3.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Us Government Securities  vs.  Quantitative Longshort Equity

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 12 (%) 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.

Quantitative Longshort

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quantitative Longshort Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Quantitative 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 Quantitative

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

The idea behind Us Government Securities and Quantitative Longshort Equity 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.