Correlation Between Intermediate Government and Dana Large
Can any of the company-specific risk be diversified away by investing in both Intermediate Government and Dana Large 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 Intermediate Government and Dana Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intermediate Government Bond and Dana Large Cap, you can compare the effects of market volatilities on Intermediate Government and Dana Large 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 Intermediate Government with a short position of Dana Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate Government and Dana Large.
Diversification Opportunities for Intermediate Government and Dana Large
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Intermediate and Dana is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Government Bond and Dana Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana Large Cap and Intermediate 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 Intermediate Government Bond are associated (or correlated) with Dana Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Large Cap has no effect on the direction of Intermediate Government i.e., Intermediate Government and Dana Large go up and down completely randomly.
Pair Corralation between Intermediate Government and Dana Large
Assuming the 90 days horizon Intermediate Government is expected to generate 9.36 times less return on investment than Dana Large. But when comparing it to its historical volatility, Intermediate Government Bond is 7.3 times less risky than Dana Large. It trades about 0.09 of its potential returns per unit of risk. Dana Large Cap is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,401 in Dana Large Cap on September 4, 2025 and sell it today you would earn a total of 141.00 from holding Dana Large Cap or generate 5.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intermediate Government Bond vs. Dana Large Cap
Performance |
| Timeline |
| Intermediate Government |
| Dana Large Cap |
Intermediate Government and Dana Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intermediate Government and Dana Large
The main advantage of trading using opposite Intermediate Government and Dana Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate Government position performs unexpectedly, Dana Large 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 Dana Large will offset losses from the drop in Dana Large's long position.The idea behind Intermediate Government Bond and Dana Large Cap 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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Check out your portfolio center.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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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