Correlation Between Government Securities and Astor Long/short

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

Diversification Opportunities for Government Securities and Astor Long/short

-0.71

Correlation Coefficient

Government Securities  Astor Long/short

Pay attention - limited upside

The 3 months correlation between Government and Astor is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Government Securities Fund and Astor Longshort Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astor Long/short 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 Astor Long/short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astor Long/short has no effect on the direction of Government Securities i.e., Government Securities and Astor Long/short go up and down completely randomly.

Pair Corralation between Government Securities and Astor Long/short

Assuming the 90 days horizon Government Securities Fund is expected to under-perform the Astor Long/short. But the mutual fund apears to be less risky and, when comparing its historical volatility, Government Securities Fund is 1.41 times less risky than Astor Long/short. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Astor Longshort Fund is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,357  in Astor Longshort Fund on September 2, 2024 and sell it today you would earn a total of  74.00  from holding Astor Longshort Fund or generate 5.45% return on investment over 90 days.

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

Government Securities Fund  vs.  Astor Longshort Fund

Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Government Securities Fund has generated negative risk-adjusted returns adding no value to fund investors. 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.

Astor Long/short

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Astor Longshort Fund are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Astor Long/short 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 Astor Long/short

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

The idea behind Government Securities Fund and Astor Longshort Fund 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.