Correlation Between Inverse Dow and Sp 500
Can any of the company-specific risk be diversified away by investing in both Inverse Dow 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 Dow 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 Dow 2x and Sp 500 Fund, you can compare the effects of market volatilities on Inverse Dow 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 Dow with a short position of Sp 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Dow and Sp 500.
Diversification Opportunities for Inverse Dow and Sp 500
-0.97 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Inverse and RYSOX is -0.97. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Dow 2x and Sp 500 Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp 500 Fund 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 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 Fund has no effect on the direction of Inverse Dow i.e., Inverse Dow and Sp 500 go up and down completely randomly.
Pair Corralation between Inverse Dow and Sp 500
Assuming the 90 days horizon Inverse Dow 2x is expected to under-perform the Sp 500. In addition to that, Inverse Dow is 1.77 times more volatile than Sp 500 Fund. It trades about -0.09 of its total potential returns per unit of risk. Sp 500 Fund is currently generating about 0.12 per unit of volatility. If you would invest 6,631 in Sp 500 Fund on August 31, 2024 and sell it today you would earn a total of 2,559 from holding Sp 500 Fund or generate 38.59% 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. Sp 500 Fund
Performance |
| Timeline |
| Inverse Dow 2x |
| Sp 500 Fund |
Inverse Dow and Sp 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Dow and Sp 500
The main advantage of trading using opposite Inverse Dow and Sp 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Dow 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 Dow vs. Virtus Convertible | Inverse Dow vs. Fidelity Sai Convertible | Inverse Dow vs. Putnam Convertible Incm Gwth | Inverse Dow vs. The Gamco Global |
| Sp 500 vs. John Hancock Financial | Sp 500 vs. Icon Financial Fund | Sp 500 vs. Royce Global Financial | Sp 500 vs. Fidelity Advisor 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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