Correlation Between Us Government and Spectrum Fund

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

Diversification Opportunities for Us Government and Spectrum Fund

0.54

Correlation Coefficient

Us Government  Spectrum Fund

Very weak diversification

The 3 months correlation between UGSDX and Spectrum is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and Spectrum Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Fund Instit 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 Spectrum Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Fund Instit has no effect on the direction of Us Government i.e., Us Government and Spectrum Fund go up and down completely randomly.

Pair Corralation between Us Government and Spectrum Fund

Assuming the 90 days horizon Us Government Securities is expected to generate 0.09 times more return on investment than Spectrum Fund. However, Us Government Securities is 10.77 times less risky than Spectrum Fund. It trades about 0.07 of its potential returns per unit of risk. Spectrum Fund Institutional is currently generating about -0.02 per unit of risk. If you would invest  194.00  in Us Government Securities on September 14, 2024 and sell it today you would earn a total of  1.00  from holding Us Government Securities or generate 0.52% return on investment over 90 days.

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

Us Government Securities  vs.  Spectrum Fund Institutional

Us Government Securities

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Us Government Securities are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong 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.

Spectrum Fund Instit

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Spectrum Fund Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Spectrum 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 Us Government and Spectrum Fund

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

The idea behind Us Government Securities and Spectrum Fund Institutional 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.