Correlation Between 10 Year and 30 Day

Can any of the company-specific risk be diversified away by investing in both 10 Year and 30 Day 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 10 Year and 30 Day into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 10 Year T Note Futures and 30 Day Fed, you can compare the effects of market volatilities on 10 Year and 30 Day 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 10 Year with a short position of 30 Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of 10 Year and 30 Day.

Diversification Opportunities for 10 Year and 30 Day

-0.77

Correlation Coefficient

10 Year  30 Day

Pay attention - limited upside

The 3 months correlation between ZNUSD and ZQUSD is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding 10 Year T Note Futures and 30 Day Fed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 30 Day Fed and 10 Year 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 10 Year T Note Futures are associated (or correlated) with 30 Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 30 Day Fed has no effect on the direction of 10 Year i.e., 10 Year and 30 Day go up and down completely randomly.

Pair Corralation between 10 Year and 30 Day

Assuming the 90 days horizon 10 Year T Note Futures is expected to under-perform the 30 Day. In addition to that, 10 Year is 4.97 times more volatile than 30 Day Fed. It trades about -0.15 of its total potential returns per unit of risk. 30 Day Fed is currently generating about 0.21 per unit of volatility. If you would invest  9,481  in 30 Day Fed on September 5, 2024 and sell it today you would earn a total of  80.00  from holding 30 Day Fed or generate 0.84% return on investment over 90 days.

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

10 Year T Note Futures  vs.  30 Day Fed

10 Year T

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 10 Year T Note Futures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, 10 Year is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

30 Day Fed

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 30 Day Fed are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, 30 Day is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with 10 Year and 30 Day

The main advantage of trading using opposite 10 Year and 30 Day positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 10 Year position performs unexpectedly, 30 Day 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 30 Day will offset losses from the drop in 30 Day's long position.

The idea behind 10 Year T Note Futures and 30 Day Fed 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.