Correlation Between Government Long and Nova Fund

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

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

Diversification Opportunities for Government Long and Nova Fund

-0.51

Correlation Coefficient

Government Long  Nova Fund

Excellent diversification

The 3 months correlation between Government and Nova is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Government Long Bond and Nova Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Fund Class and Government Long 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 Long Bond are associated (or correlated) with Nova Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Fund Class has no effect on the direction of Government Long i.e., Government Long and Nova Fund go up and down completely randomly.

Pair Corralation between Government Long and Nova Fund

Assuming the 90 days horizon Government Long Bond is expected to under-perform the Nova Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Government Long Bond is 1.02 times less risky than Nova Fund. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Nova Fund Class is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  12,735  in Nova Fund Class on September 21, 2024 and sell it today you would earn a total of  313.00  from holding Nova Fund Class or generate 2.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Government Long Bond  vs.  Nova Fund Class

Government Long Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Government Long Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Nova Fund Class

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Fund Class are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Nova Fund 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 Long and Nova Fund

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

The idea behind Government Long Bond and Nova Fund Class 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .