Correlation Between Regional Bank and Commodities Strategy
Can any of the company-specific risk be diversified away by investing in both Regional Bank and Commodities Strategy 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 Regional Bank and Commodities Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Regional Bank Fund and Commodities Strategy Fund, you can compare the effects of market volatilities on Regional Bank and Commodities Strategy 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 Regional Bank with a short position of Commodities Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Bank and Commodities Strategy.
Diversification Opportunities for Regional Bank and Commodities Strategy
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Regional and Commodities is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Regional Bank Fund and Commodities Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodities Strategy and Regional Bank 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 Regional Bank Fund are associated (or correlated) with Commodities Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodities Strategy has no effect on the direction of Regional Bank i.e., Regional Bank and Commodities Strategy go up and down completely randomly.
Pair Corralation between Regional Bank and Commodities Strategy
Assuming the 90 days horizon Regional Bank Fund is expected to under-perform the Commodities Strategy. But the mutual fund apears to be less risky and, when comparing its historical volatility, Regional Bank Fund is 1.04 times less risky than Commodities Strategy. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Commodities Strategy Fund is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,885 in Commodities Strategy Fund on September 13, 2024 and sell it today you would earn a total of 93.00 from holding Commodities Strategy Fund or generate 3.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Regional Bank Fund vs. Commodities Strategy Fund
Performance |
| Timeline |
| Regional Bank |
| Commodities Strategy |
Regional Bank and Commodities Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Regional Bank and Commodities Strategy
The main advantage of trading using opposite Regional Bank and Commodities Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Bank position performs unexpectedly, Commodities Strategy 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 Commodities Strategy will offset losses from the drop in Commodities Strategy's long position.| Regional Bank vs. Rbc Microcap Value | Regional Bank vs. Rbb Fund | Regional Bank vs. Leggmason Partners Institutional | Regional Bank vs. Arrow Managed Futures |
| Commodities Strategy vs. Basic Materials Fund | Commodities Strategy vs. Energy Services Fund | Commodities Strategy vs. Energy Fund Investor | Commodities Strategy vs. Real Estate 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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