Correlation Between Dow 2x and Balanced Strategy
Can any of the company-specific risk be diversified away by investing in both Dow 2x and Balanced Strategy 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 Balanced Strategy 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 Balanced Strategy Fund, you can compare the effects of market volatilities on Dow 2x and Balanced Strategy 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 Balanced Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow 2x and Balanced Strategy.
Diversification Opportunities for Dow 2x and Balanced Strategy
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Balanced is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Dow 2x Strategy and Balanced Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Strategy 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 Balanced Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Strategy has no effect on the direction of Dow 2x i.e., Dow 2x and Balanced Strategy go up and down completely randomly.
Pair Corralation between Dow 2x and Balanced Strategy
Assuming the 90 days horizon Dow 2x Strategy is expected to generate 3.19 times more return on investment than Balanced Strategy. However, Dow 2x is 3.19 times more volatile than Balanced Strategy Fund. It trades about 0.09 of its potential returns per unit of risk. Balanced Strategy Fund is currently generating about 0.06 per unit of risk. If you would invest 16,233 in Dow 2x Strategy on November 2, 2024 and sell it today you would earn a total of 2,307 from holding Dow 2x Strategy or generate 14.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow 2x Strategy vs. Balanced Strategy Fund
Performance |
| Timeline |
| Dow 2x Strategy |
| Balanced Strategy |
Dow 2x and Balanced Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dow 2x and Balanced Strategy
The main advantage of trading using opposite Dow 2x and Balanced Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow 2x position performs unexpectedly, Balanced Strategy 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 Balanced Strategy will offset losses from the drop in Balanced Strategy'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 |
| Balanced Strategy vs. Short Precious Metals | Balanced Strategy vs. Wells Fargo Advantage | Balanced Strategy vs. Global Gold Fund | Balanced Strategy vs. Wells Fargo Advantage |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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