Correlation Between Micro E and Five Year
Can any of the company-specific risk be diversified away by investing in both Micro E and Five Year 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 Micro E and Five Year into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micro E mini Russell and Five Year Treasury Note, you can compare the effects of market volatilities on Micro E and Five Year 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 Micro E with a short position of Five Year. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micro E and Five Year.
Diversification Opportunities for Micro E and Five Year
Pay attention - limited upside
The 3 months correlation between Micro and Five is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Micro E mini Russell and Five Year Treasury Note in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Year Treasury and Micro E 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 Micro E mini Russell are associated (or correlated) with Five Year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Year Treasury has no effect on the direction of Micro E i.e., Micro E and Five Year go up and down completely randomly.
Pair Corralation between Micro E and Five Year
Assuming the 90 days trading horizon Micro E mini Russell is expected to generate 6.23 times more return on investment than Five Year. However, Micro E is 6.23 times more volatile than Five Year Treasury Note. It trades about 0.12 of its potential returns per unit of risk. Five Year Treasury Note is currently generating about -0.14 per unit of risk. If you would invest 221,050 in Micro E mini Russell on August 29, 2024 and sell it today you would earn a total of 22,600 from holding Micro E mini Russell or generate 10.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Micro E mini Russell vs. Five Year Treasury Note
Performance |
| Timeline |
| Micro E mini |
| Five Year Treasury |
Micro E and Five Year Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micro E and Five Year
The main advantage of trading using opposite Micro E and Five Year positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micro E position performs unexpectedly, Five Year 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 Five Year will offset losses from the drop in Five Year's long position.| Micro E vs. Soybean Meal Futures | Micro E vs. Five Year Treasury Note | Micro E vs. Lean Hogs Futures | Micro E vs. Aluminum Futures |
| Five Year vs. Cocoa | Five Year vs. Micro Gold Futures | Five Year vs. Cotton | Five Year vs. Lean Hogs Futures |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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