Correlation Between Short Term and Value Fund

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

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

Diversification Opportunities for Short Term and Value Fund

-0.22

Correlation Coefficient

Short Term  Value Fund

Very good diversification

The 3 months correlation between Short and Value is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund and Value Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund I and Short Term 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 Short Term Government Fund are associated (or correlated) with Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund I has no effect on the direction of Short Term i.e., Short Term and Value Fund go up and down completely randomly.

Pair Corralation between Short Term and Value Fund

Assuming the 90 days horizon Short Term Government Fund is expected to generate 0.1 times more return on investment than Value Fund. However, Short Term Government Fund is 9.76 times less risky than Value Fund. It trades about 0.08 of its potential returns per unit of risk. Value Fund I is currently generating about 0.0 per unit of risk. If you would invest  890.00  in Short Term Government Fund on March 25, 2025 and sell it today you would earn a total of  7.00  from holding Short Term Government Fund or generate 0.79% return on investment over 90 days.

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

Short Term Government Fund  vs.  Value Fund I

Short Term Government

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Government Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Short Term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Value Fund I

Risk-Adjusted Performance

Very Weak

Over the last 90 days Value Fund I has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Value Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Short Term and Value Fund

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

The idea behind Short Term Government Fund and Value Fund I 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.