Correlation Between Inverse Dow and Banking Fund
Can any of the company-specific risk be diversified away by investing in both Inverse Dow and Banking Fund 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 Dow and Banking Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse Dow 2x and Banking Fund Class, you can compare the effects of market volatilities on Inverse Dow and Banking Fund 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 Dow with a short position of Banking Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Dow and Banking Fund.
Diversification Opportunities for Inverse Dow and Banking Fund
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Inverse and Banking is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Dow 2x and Banking Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banking Fund Class and Inverse Dow 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 Dow 2x are associated (or correlated) with Banking Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banking Fund Class has no effect on the direction of Inverse Dow i.e., Inverse Dow and Banking Fund go up and down completely randomly.
Pair Corralation between Inverse Dow and Banking Fund
Assuming the 90 days horizon Inverse Dow 2x is expected to under-perform the Banking Fund. In addition to that, Inverse Dow is 1.04 times more volatile than Banking Fund Class. It trades about -0.05 of its total potential returns per unit of risk. Banking Fund Class is currently generating about 0.07 per unit of volatility. If you would invest 6,901 in Banking Fund Class on October 21, 2024 and sell it today you would earn a total of 927.00 from holding Banking Fund Class or generate 13.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Dow 2x vs. Banking Fund Class
Performance |
| Timeline |
| Inverse Dow 2x |
| Banking Fund Class |
Inverse Dow and Banking Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Dow and Banking Fund
The main advantage of trading using opposite Inverse Dow and Banking Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Dow position performs unexpectedly, Banking Fund 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 Banking Fund will offset losses from the drop in Banking Fund's long position.| Inverse Dow vs. Franklin Small Cap | Inverse Dow vs. Sp Smallcap 600 | Inverse Dow vs. Ab Small Cap | Inverse Dow vs. Ab Small Cap |
| Banking Fund vs. Vanguard Financials Index | Banking Fund vs. Davis Financial Fund | Banking Fund vs. Prudential Financial Services | Banking Fund vs. John Hancock Financial |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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