Correlation Between Government Securities and Victory High

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

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

Diversification Opportunities for Government Securities and Victory High

-0.3

Correlation Coefficient

Government Securities  Victory High

Very good diversification

The 3 months correlation between Government and Victory is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Government Securities Fund and Victory High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory High Yield and Government Securities 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 Government Securities Fund are associated (or correlated) with Victory High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory High Yield has no effect on the direction of Government Securities i.e., Government Securities and Victory High go up and down completely randomly.

Pair Corralation between Government Securities and Victory High

Assuming the 90 days horizon Government Securities is expected to generate 1.7 times less return on investment than Victory High. In addition to that, Government Securities is 1.19 times more volatile than Victory High Yield. It trades about 0.1 of its total potential returns per unit of risk. Victory High Yield is currently generating about 0.21 per unit of volatility. If you would invest  510.00  in Victory High Yield on August 17, 2024 and sell it today you would earn a total of  38.00  from holding Victory High Yield or generate 7.45% return on investment over 90 days.

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

Government Securities Fund  vs.  Victory High Yield

Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Victory High Yield

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Victory High Yield are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Victory High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Government Securities and Victory High

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

The idea behind Government Securities Fund and Victory High Yield 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.