Correlation Between Dow 2x and Aam Select
Can any of the company-specific risk be diversified away by investing in both Dow 2x and Aam Select 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 Dow 2x and Aam Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow 2x Strategy and Aam Select Income, you can compare the effects of market volatilities on Dow 2x and Aam Select 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 Dow 2x with a short position of Aam Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow 2x and Aam Select.
Diversification Opportunities for Dow 2x and Aam Select
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Aam is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dow 2x Strategy and Aam Select Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aam Select Income and Dow 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 Dow 2x Strategy are associated (or correlated) with Aam Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aam Select Income has no effect on the direction of Dow 2x i.e., Dow 2x and Aam Select go up and down completely randomly.
Pair Corralation between Dow 2x and Aam Select
Assuming the 90 days horizon Dow 2x Strategy is expected to generate 3.74 times more return on investment than Aam Select. However, Dow 2x is 3.74 times more volatile than Aam Select Income. It trades about 0.06 of its potential returns per unit of risk. Aam Select Income is currently generating about 0.04 per unit of risk. If you would invest 11,893 in Dow 2x Strategy on October 20, 2024 and sell it today you would earn a total of 5,541 from holding Dow 2x Strategy or generate 46.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow 2x Strategy vs. Aam Select Income
Performance |
| Timeline |
| Dow 2x Strategy |
| Aam Select Income |
Dow 2x and Aam Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dow 2x and Aam Select
The main advantage of trading using opposite Dow 2x and Aam Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow 2x position performs unexpectedly, Aam Select 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 Aam Select will offset losses from the drop in Aam Select's long position.| Dow 2x vs. Sp 500 2x | Dow 2x vs. Inverse Dow 2x | Dow 2x vs. Nasdaq 100 2x Strategy | Dow 2x vs. Russell 2000 2x |
| Aam Select vs. Alphacentric Symmetry Strategy | Aam Select vs. Artisan Developing World | Aam Select vs. Saat Defensive Strategy | Aam Select vs. Dow 2x Strategy |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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