Correlation Between ETFS Ultra and ETFS SP
Can any of the company-specific risk be diversified away by investing in both ETFS Ultra and ETFS SP 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 ETFS Ultra and ETFS SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETFS Ultra Long and ETFS SP Biotech, you can compare the effects of market volatilities on ETFS Ultra and ETFS SP 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 ETFS Ultra with a short position of ETFS SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS Ultra and ETFS SP.
Diversification Opportunities for ETFS Ultra and ETFS SP
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ETFS and ETFS is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Ultra Long and ETFS SP Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS SP Biotech and ETFS Ultra 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 ETFS Ultra Long are associated (or correlated) with ETFS SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS SP Biotech has no effect on the direction of ETFS Ultra i.e., ETFS Ultra and ETFS SP go up and down completely randomly.
Pair Corralation between ETFS Ultra and ETFS SP
Assuming the 90 days trading horizon ETFS Ultra Long is expected to generate 1.13 times more return on investment than ETFS SP. However, ETFS Ultra is 1.13 times more volatile than ETFS SP Biotech. It trades about 0.07 of its potential returns per unit of risk. ETFS SP Biotech is currently generating about 0.03 per unit of risk. If you would invest 1,030 in ETFS Ultra Long on August 29, 2024 and sell it today you would earn a total of 32.00 from holding ETFS Ultra Long or generate 3.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETFS Ultra Long vs. ETFS SP Biotech
Performance |
| Timeline |
| ETFS Ultra Long |
| ETFS SP Biotech |
ETFS Ultra and ETFS SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETFS Ultra and ETFS SP
The main advantage of trading using opposite ETFS Ultra and ETFS SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Ultra position performs unexpectedly, ETFS SP 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 ETFS SP will offset losses from the drop in ETFS SP's long position.| ETFS Ultra vs. ETFS Battery Tech | ETFS Ultra vs. ETFS Ultra Short | ETFS Ultra vs. ETFS FANG ETF | ETFS Ultra vs. ETFS SP Biotech |
| ETFS SP vs. ETFS Battery Tech | ETFS SP vs. ETFS Ultra Long | ETFS SP vs. ETFS Ultra Short | ETFS SP vs. ETFS FANG ETF |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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