Correlation Between ETRACS 2xMonthly and IShares SP
Can any of the company-specific risk be diversified away by investing in both ETRACS 2xMonthly and IShares 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 ETRACS 2xMonthly and IShares SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETRACS 2xMonthly Pay and iShares SP 500, you can compare the effects of market volatilities on ETRACS 2xMonthly and IShares 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 ETRACS 2xMonthly with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS 2xMonthly and IShares SP.
Diversification Opportunities for ETRACS 2xMonthly and IShares SP
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ETRACS and IShares is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS 2xMonthly Pay and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 and ETRACS 2xMonthly 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 ETRACS 2xMonthly Pay are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of ETRACS 2xMonthly i.e., ETRACS 2xMonthly and IShares SP go up and down completely randomly.
Pair Corralation between ETRACS 2xMonthly and IShares SP
Given the investment horizon of 90 days ETRACS 2xMonthly Pay is expected to under-perform the IShares SP. In addition to that, ETRACS 2xMonthly is 1.43 times more volatile than iShares SP 500. It trades about -0.17 of its total potential returns per unit of risk. iShares SP 500 is currently generating about -0.23 per unit of volatility. If you would invest 20,047 in iShares SP 500 on September 18, 2024 and sell it today you would lose (570.00) from holding iShares SP 500 or give up 2.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETRACS 2xMonthly Pay vs. iShares SP 500
Performance |
| Timeline |
| ETRACS 2xMonthly Pay |
| iShares SP 500 |
ETRACS 2xMonthly and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETRACS 2xMonthly and IShares SP
The main advantage of trading using opposite ETRACS 2xMonthly and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS 2xMonthly position performs unexpectedly, IShares 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 IShares SP will offset losses from the drop in IShares SP's long position.| ETRACS 2xMonthly vs. ProShares UltraShort Yen | ETRACS 2xMonthly vs. ProShares Ultra Telecommunications | ETRACS 2xMonthly vs. ProShares Ultra Consumer | ETRACS 2xMonthly vs. ProShares Ultra Consumer |
| IShares SP vs. iShares SP 500 | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares SP Small Cap | IShares SP vs. iShares SP Mid Cap |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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