Correlation Between Ultra Short and Long-term
Can any of the company-specific risk be diversified away by investing in both Ultra Short and Long-term 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 Ultra Short and Long-term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultra Short Term Fixed and Long Term Government Fund, you can compare the effects of market volatilities on Ultra Short and Long-term 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 Ultra Short with a short position of Long-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Short and Long-term.
Diversification Opportunities for Ultra Short and Long-term
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ultra and Long-term is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Short Term Fixed and Long Term Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long Term Government and Ultra Short 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 Ultra Short Term Fixed are associated (or correlated) with Long-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long Term Government has no effect on the direction of Ultra Short i.e., Ultra Short and Long-term go up and down completely randomly.
Pair Corralation between Ultra Short and Long-term
Assuming the 90 days horizon Ultra Short is expected to generate 3.32 times less return on investment than Long-term. But when comparing it to its historical volatility, Ultra Short Term Fixed is 9.77 times less risky than Long-term. It trades about 0.21 of its potential returns per unit of risk. Long Term Government Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,339 in Long Term Government Fund on June 2, 2025 and sell it today you would earn a total of 40.00 from holding Long Term Government Fund or generate 2.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ultra Short Term Fixed vs. Long Term Government Fund
Performance |
| Timeline |
| Ultra Short Term |
| Long Term Government |
Ultra Short and Long-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra Short and Long-term
The main advantage of trading using opposite Ultra Short and Long-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Short position performs unexpectedly, Long-term 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 Long-term will offset losses from the drop in Long-term's long position.| Ultra Short vs. Lsv Small Cap | Ultra Short vs. Fidelity Small Cap | Ultra Short vs. Perkins Small Cap | Ultra Short vs. Small Cap Value Fund |
| Long-term vs. Goldman Sachs Technology | Long-term vs. Allianzgi Technology Fund | Long-term vs. Vanguard Information Technology | Long-term vs. Nationwide Bailard Technology |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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