Correlation Between InfraCap MLP and ETRACS Alerian
Can any of the company-specific risk be diversified away by investing in both InfraCap MLP and ETRACS Alerian 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 InfraCap MLP and ETRACS Alerian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between InfraCap MLP ETF and ETRACS Alerian Midstream, you can compare the effects of market volatilities on InfraCap MLP and ETRACS Alerian 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 InfraCap MLP with a short position of ETRACS Alerian. Check out your portfolio center. Please also check ongoing floating volatility patterns of InfraCap MLP and ETRACS Alerian.
Diversification Opportunities for InfraCap MLP and ETRACS Alerian
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between InfraCap and ETRACS is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding InfraCap MLP ETF and ETRACS Alerian Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Alerian Midstream and InfraCap MLP 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 InfraCap MLP ETF are associated (or correlated) with ETRACS Alerian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Alerian Midstream has no effect on the direction of InfraCap MLP i.e., InfraCap MLP and ETRACS Alerian go up and down completely randomly.
Pair Corralation between InfraCap MLP and ETRACS Alerian
Given the investment horizon of 90 days InfraCap MLP ETF is expected to generate 1.38 times more return on investment than ETRACS Alerian. However, InfraCap MLP is 1.38 times more volatile than ETRACS Alerian Midstream. It trades about 0.1 of its potential returns per unit of risk. ETRACS Alerian Midstream is currently generating about 0.12 per unit of risk. If you would invest 2,606 in InfraCap MLP ETF on August 29, 2024 and sell it today you would earn a total of 2,009 from holding InfraCap MLP ETF or generate 77.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
InfraCap MLP ETF vs. ETRACS Alerian Midstream
Performance |
| Timeline |
| InfraCap MLP ETF |
| ETRACS Alerian Midstream |
InfraCap MLP and ETRACS Alerian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InfraCap MLP and ETRACS Alerian
The main advantage of trading using opposite InfraCap MLP and ETRACS Alerian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InfraCap MLP position performs unexpectedly, ETRACS Alerian 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 ETRACS Alerian will offset losses from the drop in ETRACS Alerian's long position.| InfraCap MLP vs. Virtus InfraCap Preferred | InfraCap MLP vs. Global X MLP | InfraCap MLP vs. Amplify High Income | InfraCap MLP vs. Alerian MLP ETF |
| ETRACS Alerian vs. Global X MLP | ETRACS Alerian vs. Tortoise North American | ETRACS Alerian vs. InfraCap MLP ETF | ETRACS Alerian vs. Barclays ETN Select |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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