Correlation Between Knife River and ETRACS 2x
Can any of the company-specific risk be diversified away by investing in both Knife River and ETRACS 2x 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 Knife River and ETRACS 2x into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knife River and ETRACS 2x Leveraged, you can compare the effects of market volatilities on Knife River and ETRACS 2x 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 Knife River with a short position of ETRACS 2x. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knife River and ETRACS 2x.
Diversification Opportunities for Knife River and ETRACS 2x
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Knife and ETRACS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and ETRACS 2x Leveraged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS 2x Leveraged and Knife River 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 Knife River are associated (or correlated) with ETRACS 2x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS 2x Leveraged has no effect on the direction of Knife River i.e., Knife River and ETRACS 2x go up and down completely randomly.
Pair Corralation between Knife River and ETRACS 2x
Considering the 90-day investment horizon Knife River is expected to generate 1.62 times less return on investment than ETRACS 2x. In addition to that, Knife River is 1.42 times more volatile than ETRACS 2x Leveraged. It trades about 0.11 of its total potential returns per unit of risk. ETRACS 2x Leveraged is currently generating about 0.25 per unit of volatility. If you would invest 4,260 in ETRACS 2x Leveraged on September 1, 2024 and sell it today you would earn a total of 527.00 from holding ETRACS 2x Leveraged or generate 12.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Knife River vs. ETRACS 2x Leveraged
Performance |
| Timeline |
| Knife River |
| ETRACS 2x Leveraged |
Knife River and ETRACS 2x Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knife River and ETRACS 2x
The main advantage of trading using opposite Knife River and ETRACS 2x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knife River position performs unexpectedly, ETRACS 2x 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 2x will offset losses from the drop in ETRACS 2x's long position.| Knife River vs. Park Hotels Resorts | Knife River vs. The Wendys Co | Knife River vs. Dave Busters Entertainment | Knife River vs. Playa Hotels Resorts |
| ETRACS 2x vs. ETRACS 2x Leveraged | ETRACS 2x vs. ETRACS 2x Leveraged | ETRACS 2x vs. ETRACS 2x Leveraged | ETRACS 2x vs. ETRACS 2x Leveraged |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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