Correlation Between Collaborative Investment and MKAM ETF
Can any of the company-specific risk be diversified away by investing in both Collaborative Investment and MKAM ETF 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 Collaborative Investment and MKAM ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Collaborative Investment Series and MKAM ETF, you can compare the effects of market volatilities on Collaborative Investment and MKAM ETF 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 Collaborative Investment with a short position of MKAM ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Collaborative Investment and MKAM ETF.
Diversification Opportunities for Collaborative Investment and MKAM ETF
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Collaborative and MKAM is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Collaborative Investment Serie and MKAM ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MKAM ETF and Collaborative Investment 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 Collaborative Investment Series are associated (or correlated) with MKAM ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MKAM ETF has no effect on the direction of Collaborative Investment i.e., Collaborative Investment and MKAM ETF go up and down completely randomly.
Pair Corralation between Collaborative Investment and MKAM ETF
Given the investment horizon of 90 days Collaborative Investment is expected to generate 1.29 times less return on investment than MKAM ETF. But when comparing it to its historical volatility, Collaborative Investment Series is 2.01 times less risky than MKAM ETF. It trades about 0.19 of its potential returns per unit of risk. MKAM ETF is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,778 in MKAM ETF on September 1, 2024 and sell it today you would earn a total of 202.00 from holding MKAM ETF or generate 7.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Collaborative Investment Serie vs. MKAM ETF
Performance |
| Timeline |
| Collaborative Investment |
| MKAM ETF |
Collaborative Investment and MKAM ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Collaborative Investment and MKAM ETF
The main advantage of trading using opposite Collaborative Investment and MKAM ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Collaborative Investment position performs unexpectedly, MKAM ETF 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 MKAM ETF will offset losses from the drop in MKAM ETF's long position.The idea behind Collaborative Investment Series and MKAM ETF pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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