Correlation Between International Government and Consumer Products

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

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

Diversification Opportunities for International Government and Consumer Products

0.44

Correlation Coefficient

International Government  Consumer Products

Very weak diversification

The 3 months correlation between International and Consumer is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding International Government Bond and Consumer Products Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Products and International 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 International Government Bond are associated (or correlated) with Consumer Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Products has no effect on the direction of International Government i.e., International Government and Consumer Products go up and down completely randomly.

Pair Corralation between International Government and Consumer Products

Assuming the 90 days horizon International Government Bond is expected to generate 0.46 times more return on investment than Consumer Products. However, International Government Bond is 2.18 times less risky than Consumer Products. It trades about 0.08 of its potential returns per unit of risk. Consumer Products Fund is currently generating about 0.03 per unit of risk. If you would invest  1,032  in International Government Bond on May 2, 2025 and sell it today you would earn a total of  17.00  from holding International Government Bond or generate 1.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

International Government Bond  vs.  Consumer Products Fund

International Government

Risk-Adjusted Performance

Modest

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

Consumer Products

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Products Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Consumer Products is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with International Government and Consumer Products

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

The idea behind International Government Bond and Consumer Products Fund 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.