Correlation Between Banking Fund and Inverse Dow
Can any of the company-specific risk be diversified away by investing in both Banking Fund and Inverse 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 Banking Fund and Inverse Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banking Fund Class and Inverse Dow 2x, you can compare the effects of market volatilities on Banking Fund and Inverse 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 Banking Fund with a short position of Inverse Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banking Fund and Inverse Dow.
Diversification Opportunities for Banking Fund and Inverse Dow
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Banking and Inverse is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Banking Fund Class and Inverse Dow 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Dow 2x and Banking Fund 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 Banking Fund Class are associated (or correlated) with Inverse Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Dow 2x has no effect on the direction of Banking Fund i.e., Banking Fund and Inverse Dow go up and down completely randomly.
Pair Corralation between Banking Fund and Inverse Dow
Assuming the 90 days horizon Banking Fund Class is expected to under-perform the Inverse Dow. But the mutual fund apears to be less risky and, when comparing its historical volatility, Banking Fund Class is 1.37 times less risky than Inverse Dow. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Inverse Dow 2x is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 2,705 in Inverse Dow 2x on September 12, 2024 and sell it today you would lose (7.00) from holding Inverse Dow 2x or give up 0.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banking Fund Class vs. Inverse Dow 2x
Performance |
| Timeline |
| Banking Fund Class |
| Inverse Dow 2x |
Banking Fund and Inverse Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banking Fund and Inverse Dow
The main advantage of trading using opposite Banking Fund and Inverse Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banking Fund position performs unexpectedly, Inverse 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 Inverse Dow will offset losses from the drop in Inverse Dow's long position.| Banking Fund vs. Banking Fund Class | Banking Fund vs. Banking Fund Class | Banking Fund vs. Banking Fund Investor | Banking Fund vs. Banking Portfolio Banking |
| Inverse Dow vs. Dreyfusstandish Global Fixed | Inverse Dow vs. T Rowe Price | Inverse Dow vs. T Rowe Price | Inverse Dow vs. Alliancebernstein National Municipal |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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