Correlation Between Falling Us and Strengthening Dollar
Can any of the company-specific risk be diversified away by investing in both Falling Us and Strengthening Dollar 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 Falling Us and Strengthening Dollar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Falling Dollar Profund and Strengthening Dollar 2x, you can compare the effects of market volatilities on Falling Us and Strengthening Dollar 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 Falling Us with a short position of Strengthening Dollar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falling Us and Strengthening Dollar.
Diversification Opportunities for Falling Us and Strengthening Dollar
-1.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Falling and Strengthening is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding Falling Dollar Profund and Strengthening Dollar 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strengthening Dollar and Falling Us 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 Falling Dollar Profund are associated (or correlated) with Strengthening Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strengthening Dollar has no effect on the direction of Falling Us i.e., Falling Us and Strengthening Dollar go up and down completely randomly.
Pair Corralation between Falling Us and Strengthening Dollar
Assuming the 90 days horizon Falling Dollar Profund is expected to under-perform the Strengthening Dollar. But the mutual fund apears to be less risky and, when comparing its historical volatility, Falling Dollar Profund is 1.95 times less risky than Strengthening Dollar. The mutual fund trades about -0.23 of its potential returns per unit of risk. The Strengthening Dollar 2x is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 5,518 in Strengthening Dollar 2x on August 28, 2024 and sell it today you would earn a total of 296.00 from holding Strengthening Dollar 2x or generate 5.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Falling Dollar Profund vs. Strengthening Dollar 2x
Performance |
| Timeline |
| Falling Dollar Profund |
| Strengthening Dollar |
Falling Us and Strengthening Dollar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Falling Us and Strengthening Dollar
The main advantage of trading using opposite Falling Us and Strengthening Dollar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falling Us position performs unexpectedly, Strengthening Dollar 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 Strengthening Dollar will offset losses from the drop in Strengthening Dollar's long position.| Falling Us vs. Short Real Estate | Falling Us vs. Short Real Estate | Falling Us vs. Ultrashort Mid Cap Profund | Falling Us vs. Ultrashort Mid Cap Profund |
| Strengthening Dollar vs. Basic Materials Fund | Strengthening Dollar vs. Basic Materials Fund | Strengthening Dollar vs. Banking Fund Class | Strengthening Dollar vs. Basic Materials Fund |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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