Correlation Between ETRACS 2xMonthly and IShares Global
Can any of the company-specific risk be diversified away by investing in both ETRACS 2xMonthly and IShares Global 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 Global 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 Global Financials, you can compare the effects of market volatilities on ETRACS 2xMonthly and IShares Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS 2xMonthly and IShares Global.
Diversification Opportunities for ETRACS 2xMonthly and IShares Global
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ETRACS and IShares is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS 2xMonthly Pay and iShares Global Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Financials 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Financials has no effect on the direction of ETRACS 2xMonthly i.e., ETRACS 2xMonthly and IShares Global go up and down completely randomly.
Pair Corralation between ETRACS 2xMonthly and IShares Global
Given the investment horizon of 90 days ETRACS 2xMonthly is expected to generate 3.28 times less return on investment than IShares Global. In addition to that, ETRACS 2xMonthly is 1.69 times more volatile than iShares Global Financials. It trades about 0.03 of its total potential returns per unit of risk. iShares Global Financials is currently generating about 0.14 per unit of volatility. If you would invest 8,116 in iShares Global Financials on August 27, 2024 and sell it today you would earn a total of 1,949 from holding iShares Global Financials or generate 24.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETRACS 2xMonthly Pay vs. iShares Global Financials
Performance |
| Timeline |
| ETRACS 2xMonthly Pay |
| iShares Global Financials |
ETRACS 2xMonthly and IShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETRACS 2xMonthly and IShares Global
The main advantage of trading using opposite ETRACS 2xMonthly and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS 2xMonthly position performs unexpectedly, IShares Global 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 Global will offset losses from the drop in IShares Global's long position.The idea behind ETRACS 2xMonthly Pay and iShares Global Financials 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.| IShares Global vs. UBS AG London | IShares Global vs. UBS AG London | IShares Global vs. ETRACS Quarterly Pay | IShares Global vs. ETRACS 2xMonthly Pay |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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