Correlation Between Palladium and Micro E
Can any of the company-specific risk be diversified away by investing in both Palladium and Micro E 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 Palladium and Micro E into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Palladium and Micro E mini Russell, you can compare the effects of market volatilities on Palladium and Micro E 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 Palladium with a short position of Micro E. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palladium and Micro E.
Diversification Opportunities for Palladium and Micro E
Significant diversification
The 3 months correlation between Palladium and Micro is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Palladium and Micro E mini Russell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro E mini and Palladium 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 Palladium are associated (or correlated) with Micro E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro E mini has no effect on the direction of Palladium i.e., Palladium and Micro E go up and down completely randomly.
Pair Corralation between Palladium and Micro E
Assuming the 90 days horizon Palladium is expected to under-perform the Micro E. In addition to that, Palladium is 1.99 times more volatile than Micro E mini Russell. It trades about -0.03 of its total potential returns per unit of risk. Micro E mini Russell is currently generating about 0.07 per unit of volatility. If you would invest 176,100 in Micro E mini Russell on August 29, 2024 and sell it today you would earn a total of 67,550 from holding Micro E mini Russell or generate 38.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Palladium vs. Micro E mini Russell
Performance |
| Timeline |
| Palladium |
| Micro E mini |
Palladium and Micro E Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Palladium and Micro E
The main advantage of trading using opposite Palladium and Micro E positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palladium position performs unexpectedly, Micro E 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 Micro E will offset losses from the drop in Micro E's long position.| Palladium vs. Brent Crude Oil | Palladium vs. Natural Gas | Palladium vs. Five Year Treasury Note | Palladium vs. Micro Gold Futures |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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