Correlation Between Utilities Fund and Intermediate Government

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

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

Diversification Opportunities for Utilities Fund and Intermediate Government

0.6

Correlation Coefficient

Utilities Fund  Intermediate Government

Poor diversification

The 3 months correlation between Utilities and Intermediate is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Fund Class and Intermediate Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Government and Utilities Fund 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 Utilities Fund Class are associated (or correlated) with Intermediate Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Government has no effect on the direction of Utilities Fund i.e., Utilities Fund and Intermediate Government go up and down completely randomly.

Pair Corralation between Utilities Fund and Intermediate Government

Assuming the 90 days horizon Utilities Fund Class is expected to generate 7.1 times more return on investment than Intermediate Government. However, Utilities Fund is 7.1 times more volatile than Intermediate Government Bond. It trades about 0.16 of its potential returns per unit of risk. Intermediate Government Bond is currently generating about 0.06 per unit of risk. If you would invest  5,394  in Utilities Fund Class on May 2, 2025 and sell it today you would earn a total of  439.00  from holding Utilities Fund Class or generate 8.14% return on investment over 90 days.

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

Utilities Fund Class  vs.  Intermediate Government Bond

Utilities Fund Class

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Fund Class are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Utilities Fund may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Intermediate Government

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Government Bond are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Intermediate Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Utilities Fund and Intermediate Government

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

The idea behind Utilities Fund Class and Intermediate Government Bond 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.