Correlation Between Inverse Dow and Commodities Strategy
Can any of the company-specific risk be diversified away by investing in both Inverse Dow and Commodities 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 Inverse Dow and Commodities Strategy 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 Commodities Strategy Fund, you can compare the effects of market volatilities on Inverse Dow and Commodities 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 Inverse Dow with a short position of Commodities Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Dow and Commodities Strategy.
Diversification Opportunities for Inverse Dow and Commodities Strategy
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between INVERSE and Commodities is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Dow 2x and Commodities Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodities Strategy 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 Commodities Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodities Strategy has no effect on the direction of Inverse Dow i.e., Inverse Dow and Commodities Strategy go up and down completely randomly.
Pair Corralation between Inverse Dow and Commodities Strategy
Assuming the 90 days horizon Inverse Dow 2x is expected to under-perform the Commodities Strategy. In addition to that, Inverse Dow is 1.95 times more volatile than Commodities Strategy Fund. It trades about -0.25 of its total potential returns per unit of risk. Commodities Strategy Fund is currently generating about 0.08 per unit of volatility. If you would invest 2,890 in Commodities Strategy Fund on August 28, 2024 and sell it today you would earn a total of 47.00 from holding Commodities Strategy Fund or generate 1.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Dow 2x vs. Commodities Strategy Fund
Performance |
| Timeline |
| Inverse Dow 2x |
| Commodities Strategy |
Inverse Dow and Commodities Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Dow and Commodities Strategy
The main advantage of trading using opposite Inverse Dow and Commodities Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Dow position performs unexpectedly, Commodities 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 Commodities Strategy will offset losses from the drop in Commodities Strategy's long position.| Inverse Dow vs. Alliancebernstein National Municipal | Inverse Dow vs. Pace Municipal Fixed | Inverse Dow vs. California Bond Fund | Inverse Dow vs. Franklin High Yield |
| Commodities Strategy vs. Basic Materials Fund | Commodities Strategy vs. Energy Services Fund | Commodities Strategy vs. Energy Fund Investor | Commodities Strategy vs. Real Estate Fund |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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