Correlation Between Ginnie Mae and Utilities Fund

Can any of the company-specific risk be diversified away by investing in both Ginnie Mae and Utilities Fund 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 Ginnie Mae and Utilities Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ginnie Mae Fund and Utilities Fund Investor, you can compare the effects of market volatilities on Ginnie Mae and Utilities Fund 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 Ginnie Mae with a short position of Utilities Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ginnie Mae and Utilities Fund.

Diversification Opportunities for Ginnie Mae and Utilities Fund

0.02

Correlation Coefficient

Ginnie Mae  Utilities Fund

Significant diversification

The 3 months correlation between Ginnie and Utilities is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ginnie Mae Fund and Utilities Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Fund Investor and Ginnie Mae 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 Ginnie Mae Fund are associated (or correlated) with Utilities Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Fund Investor has no effect on the direction of Ginnie Mae i.e., Ginnie Mae and Utilities Fund go up and down completely randomly.

Pair Corralation between Ginnie Mae and Utilities Fund

Assuming the 90 days horizon Ginnie Mae is expected to generate 30.2 times less return on investment than Utilities Fund. But when comparing it to its historical volatility, Ginnie Mae Fund is 2.1 times less risky than Utilities Fund. It trades about 0.02 of its potential returns per unit of risk. Utilities Fund Investor is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  1,403  in Utilities Fund Investor on February 20, 2024 and sell it today you would earn a total of  288.00  from holding Utilities Fund Investor or generate 20.53% return on investment over 90 days.

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

Ginnie Mae Fund  vs.  Utilities Fund Investor

Ginnie Mae Fund

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ginnie Mae Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Ginnie Mae is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Utilities Fund Investor

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Fund Investor are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Utilities Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ginnie Mae and Utilities Fund

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

The idea behind Ginnie Mae Fund and Utilities Fund Investor 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.