Correlation Between Swan Defined and Intermediate Government

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

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

Diversification Opportunities for Swan Defined and Intermediate Government

0.53

Correlation Coefficient

Swan Defined  Intermediate Government

Very weak diversification

The 3 months correlation between Swan and Intermediate is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Swan Defined Risk and Intermediate Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Government and Swan Defined 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 Swan Defined Risk 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 Swan Defined i.e., Swan Defined and Intermediate Government go up and down completely randomly.

Pair Corralation between Swan Defined and Intermediate Government

Assuming the 90 days horizon Swan Defined Risk is expected to generate 3.43 times more return on investment than Intermediate Government. However, Swan Defined is 3.43 times more volatile than Intermediate Government Bond. It trades about 0.21 of its potential returns per unit of risk. Intermediate Government Bond is currently generating about 0.14 per unit of risk. If you would invest  1,311  in Swan Defined Risk on May 11, 2025 and sell it today you would earn a total of  73.00  from holding Swan Defined Risk or generate 5.57% return on investment over 90 days.

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

Swan Defined Risk  vs.  Intermediate Government Bond

Swan Defined Risk

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Swan Defined Risk are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Swan Defined is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Intermediate Government

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Government Bond are ranked lower than 10 (%) 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 Swan Defined and Intermediate Government

The main advantage of trading using opposite Swan Defined and Intermediate Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swan Defined 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 Swan Defined Risk 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.