Correlation Between Commodityrealreturn and Commodity Return
Can any of the company-specific risk be diversified away by investing in both Commodityrealreturn and Commodity Return 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 Commodityrealreturn and Commodity Return into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commodityrealreturn Strategy Fund and Commodity Return Strategy, you can compare the effects of market volatilities on Commodityrealreturn and Commodity Return 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 Commodityrealreturn with a short position of Commodity Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commodityrealreturn and Commodity Return.
Diversification Opportunities for Commodityrealreturn and Commodity Return
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Commodityrealreturn and Commodity is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Commodityrealreturn Strategy F and Commodity Return Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodity Return Strategy and Commodityrealreturn 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 Commodityrealreturn Strategy Fund are associated (or correlated) with Commodity Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodity Return Strategy has no effect on the direction of Commodityrealreturn i.e., Commodityrealreturn and Commodity Return go up and down completely randomly.
Pair Corralation between Commodityrealreturn and Commodity Return
Assuming the 90 days horizon Commodityrealreturn Strategy Fund is expected to generate 12.7 times more return on investment than Commodity Return. However, Commodityrealreturn is 12.7 times more volatile than Commodity Return Strategy. It trades about 0.03 of its potential returns per unit of risk. Commodity Return Strategy is currently generating about -0.01 per unit of risk. If you would invest 947.00 in Commodityrealreturn Strategy Fund on August 29, 2024 and sell it today you would earn a total of 137.00 from holding Commodityrealreturn Strategy Fund or generate 14.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commodityrealreturn Strategy F vs. Commodity Return Strategy
Performance |
| Timeline |
| Commodityrealreturn |
| Commodity Return Strategy |
Commodityrealreturn and Commodity Return Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commodityrealreturn and Commodity Return
The main advantage of trading using opposite Commodityrealreturn and Commodity Return positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commodityrealreturn position performs unexpectedly, Commodity Return 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 Commodity Return will offset losses from the drop in Commodity Return's long position.The idea behind Commodityrealreturn Strategy Fund and Commodity Return Strategy 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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