Correlation Between Inverse Sp and Sp 500
Can any of the company-specific risk be diversified away by investing in both Inverse Sp and Sp 500 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 Inverse Sp and Sp 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse Sp 500 and Sp 500 2x, you can compare the effects of market volatilities on Inverse Sp and Sp 500 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 Inverse Sp with a short position of Sp 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Sp and Sp 500.
Diversification Opportunities for Inverse Sp and Sp 500
-1.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between INVERSE and RYCTX is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Sp 500 and Sp 500 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp 500 2x and Inverse Sp 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 Inverse Sp 500 are associated (or correlated) with Sp 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp 500 2x has no effect on the direction of Inverse Sp i.e., Inverse Sp and Sp 500 go up and down completely randomly.
Pair Corralation between Inverse Sp and Sp 500
Assuming the 90 days horizon Inverse Sp 500 is expected to under-perform the Sp 500. In addition to that, Inverse Sp is 1.0 times more volatile than Sp 500 2x. It trades about -0.16 of its total potential returns per unit of risk. Sp 500 2x is currently generating about 0.17 per unit of volatility. If you would invest 25,041 in Sp 500 2x on August 31, 2024 and sell it today you would earn a total of 3,952 from holding Sp 500 2x or generate 15.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Sp 500 vs. Sp 500 2x
Performance |
| Timeline |
| Inverse Sp 500 |
| Sp 500 2x |
Inverse Sp and Sp 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Sp and Sp 500
The main advantage of trading using opposite Inverse Sp and Sp 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Sp position performs unexpectedly, Sp 500 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 Sp 500 will offset losses from the drop in Sp 500's long position.| Inverse Sp vs. American Century High | Inverse Sp vs. Dunham High Yield | Inverse Sp vs. Gmo High Yield | Inverse Sp vs. Prudential Short Duration |
| Sp 500 vs. Vanguard Small Cap Growth | Sp 500 vs. Omni Small Cap Value | Sp 500 vs. Issachar Fund Class | Sp 500 vs. Shelton Funds |
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.
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