Correlation Between Rising Rates and Ultrashort Dow

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Rising Rates and Ultrashort Dow 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 Rising Rates and Ultrashort Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rising Rates Opportunity and Ultrashort Dow 30, you can compare the effects of market volatilities on Rising Rates and Ultrashort Dow 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 Rising Rates with a short position of Ultrashort Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rising Rates and Ultrashort Dow.

Diversification Opportunities for Rising Rates and Ultrashort Dow

-0.53
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Rising and Ultrashort is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Rising Rates Opportunity and Ultrashort Dow 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Dow 30 and Rising Rates 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 Rising Rates Opportunity are associated (or correlated) with Ultrashort Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Dow 30 has no effect on the direction of Rising Rates i.e., Rising Rates and Ultrashort Dow go up and down completely randomly.

Pair Corralation between Rising Rates and Ultrashort Dow

Assuming the 90 days horizon Rising Rates Opportunity is expected to generate 1.09 times more return on investment than Ultrashort Dow. However, Rising Rates is 1.09 times more volatile than Ultrashort Dow 30. It trades about 0.0 of its potential returns per unit of risk. Ultrashort Dow 30 is currently generating about -0.07 per unit of risk. If you would invest  3,829  in Rising Rates Opportunity on September 16, 2024 and sell it today you would lose (7.00) from holding Rising Rates Opportunity or give up 0.18% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Rising Rates Opportunity  vs.  Ultrashort Dow 30

 Performance 
       Timeline  
Rising Rates Opportunity 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Rising Rates Opportunity are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rising Rates showed solid returns over the last few months and may actually be approaching a breakup point.
Ultrashort Dow 30 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ultrashort Dow 30 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Rising Rates and Ultrashort Dow Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rising Rates and Ultrashort Dow

The main advantage of trading using opposite Rising Rates and Ultrashort Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rising Rates position performs unexpectedly, Ultrashort Dow 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 Ultrashort Dow will offset losses from the drop in Ultrashort Dow's long position.
The idea behind Rising Rates Opportunity and Ultrashort Dow 30 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.
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

Other Complementary Tools

Portfolio Dashboard
Portfolio dashboard that provides centralized access to all your investments
Global Markets Map
Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes
Equity Valuation
Check real value of public entities based on technical and fundamental data
Bond Analysis
Evaluate and analyze corporate bonds as a potential investment for your portfolios.
Latest Portfolios
Quick portfolio dashboard that showcases your latest portfolios