Correlation Between ETRACS 2x and Dow Jones
Can any of the company-specific risk be diversified away by investing in both ETRACS 2x and Dow Jones 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 2x and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETRACS 2x Leveraged and Dow Jones Industrial, you can compare the effects of market volatilities on ETRACS 2x and Dow Jones 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 2x with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS 2x and Dow Jones.
Diversification Opportunities for ETRACS 2x and Dow Jones
Almost no diversification
The 3 months correlation between ETRACS and Dow is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS 2x Leveraged and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and ETRACS 2x 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 2x Leveraged are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of ETRACS 2x i.e., ETRACS 2x and Dow Jones go up and down completely randomly.
Pair Corralation between ETRACS 2x and Dow Jones
Given the investment horizon of 90 days ETRACS 2x Leveraged is expected to generate 1.83 times more return on investment than Dow Jones. However, ETRACS 2x is 1.83 times more volatile than Dow Jones Industrial. It trades about 0.07 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.01 per unit of risk. If you would invest 5,172 in ETRACS 2x Leveraged on September 12, 2024 and sell it today you would earn a total of 77.00 from holding ETRACS 2x Leveraged or generate 1.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
ETRACS 2x Leveraged vs. Dow Jones Industrial
Performance |
| Timeline |
ETRACS 2x and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
ETRACS 2x Leveraged
Pair trading matchups for ETRACS 2x
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with ETRACS 2x and Dow Jones
The main advantage of trading using opposite ETRACS 2x and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS 2x position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| ETRACS 2x vs. FT Vest Equity | ETRACS 2x vs. Northern Lights | ETRACS 2x vs. Dimensional International High | ETRACS 2x vs. JPMorgan Fundamental Data |
| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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