Correlation Between Us Government and Commodity Return

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

Diversification Opportunities for Us Government and Commodity Return

0.12

Correlation Coefficient

Us Government  Commodity Return

Average diversification

The 3 months correlation between RGVAX and Commodity is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and Commodity Return Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodity Return Strategy 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 Commodity Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodity Return Strategy has no effect on the direction of Us Government i.e., Us Government and Commodity Return go up and down completely randomly.

Pair Corralation between Us Government and Commodity Return

Assuming the 90 days horizon Us Government Securities is expected to generate 0.41 times more return on investment than Commodity Return. However, Us Government Securities is 2.43 times less risky than Commodity Return. It trades about 0.09 of its potential returns per unit of risk. Commodity Return Strategy is currently generating about 0.0 per unit of risk. If you would invest  1,179  in Us Government Securities on May 8, 2025 and sell it today you would earn a total of  21.00  from holding Us Government Securities or generate 1.78% return on investment over 90 days.

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

Us Government Securities  vs.  Commodity Return Strategy

Us Government Securities

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Us Government Securities are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Us Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Commodity Return Strategy

Risk-Adjusted Performance

Weakest

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

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

The idea behind Us Government Securities and Commodity Return Strategy 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.