Correlation Between Energy Fund and Inverse Russell
Can any of the company-specific risk be diversified away by investing in both Energy Fund and Inverse Russell 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 Energy Fund and Inverse Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Fund Class and Inverse Russell 2000, you can compare the effects of market volatilities on Energy Fund and Inverse Russell 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 Energy Fund with a short position of Inverse Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Fund and Inverse Russell.
Diversification Opportunities for Energy Fund and Inverse Russell
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Energy and Inverse is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Energy Fund Class and Inverse Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Russell 2000 and Energy Fund 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 Energy Fund Class are associated (or correlated) with Inverse Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Russell 2000 has no effect on the direction of Energy Fund i.e., Energy Fund and Inverse Russell go up and down completely randomly.
Pair Corralation between Energy Fund and Inverse Russell
Assuming the 90 days horizon Energy Fund Class is expected to generate 1.02 times more return on investment than Inverse Russell. However, Energy Fund is 1.02 times more volatile than Inverse Russell 2000. It trades about 0.02 of its potential returns per unit of risk. Inverse Russell 2000 is currently generating about -0.01 per unit of risk. If you would invest 18,950 in Energy Fund Class on October 20, 2024 and sell it today you would earn a total of 1,331 from holding Energy Fund Class or generate 7.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Fund Class vs. Inverse Russell 2000
Performance |
| Timeline |
| Energy Fund Class |
| Inverse Russell 2000 |
Energy Fund and Inverse Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Fund and Inverse Russell
The main advantage of trading using opposite Energy Fund and Inverse Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Fund position performs unexpectedly, Inverse Russell 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 Inverse Russell will offset losses from the drop in Inverse Russell's long position.| Energy Fund vs. Dreyfusstandish Global Fixed | Energy Fund vs. Morningstar Defensive Bond | Energy Fund vs. Doubleline Total Return | Energy Fund vs. Ambrus Core Bond |
| Inverse Russell vs. Basic Materials Fund | Inverse Russell vs. Basic Materials Fund | Inverse Russell vs. Banking Fund Class | Inverse Russell vs. Basic Materials 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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