Correlation Between Long-term and Real Return
Can any of the company-specific risk be diversified away by investing in both Long-term and Real Return 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 Long-term and Real Return into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Long Term Government Fund and Real Return Fund, you can compare the effects of market volatilities on Long-term and Real Return 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 Long-term with a short position of Real Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long-term and Real Return.
Diversification Opportunities for Long-term and Real Return
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Long-term and Real is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Long Term Government Fund and Real Return Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Return Fund and Long-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 Long Term Government Fund are associated (or correlated) with Real Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Return Fund has no effect on the direction of Long-term i.e., Long-term and Real Return go up and down completely randomly.
Pair Corralation between Long-term and Real Return
Assuming the 90 days horizon Long Term Government Fund is expected to generate 2.53 times more return on investment than Real Return. However, Long-term is 2.53 times more volatile than Real Return Fund. It trades about 0.08 of its potential returns per unit of risk. Real Return Fund is currently generating about 0.2 per unit of risk. If you would invest 1,339 in Long Term Government Fund on May 27, 2025 and sell it today you would earn a total of 44.00 from holding Long Term Government Fund or generate 3.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Long Term Government Fund vs. Real Return Fund
Performance |
| Timeline |
| Long Term Government |
| Real Return Fund |
Long-term and Real Return Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Long-term and Real Return
The main advantage of trading using opposite Long-term and Real Return positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Long-term position performs unexpectedly, Real Return 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 Real Return will offset losses from the drop in Real Return's long position.| Long-term vs. Short Intermediate Bond Fund | Long-term vs. Ab Bond Inflation | Long-term vs. Gamco Global Telecommunications | Long-term vs. Flexible Bond Portfolio |
| Real Return vs. Artisan Small Cap | Real Return vs. Qs Small Capitalization | Real Return vs. Hunter Small Cap | Real Return vs. Guidemark Smallmid Cap |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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