Correlation Between Commodities Strategy and New Economy
Can any of the company-specific risk be diversified away by investing in both Commodities Strategy and New Economy 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 Commodities Strategy and New Economy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commodities Strategy Fund and New Economy Fund, you can compare the effects of market volatilities on Commodities Strategy and New Economy 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 Commodities Strategy with a short position of New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commodities Strategy and New Economy.
Diversification Opportunities for Commodities Strategy and New Economy
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Commodities and New is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Commodities Strategy Fund and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund and Commodities Strategy 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 Commodities Strategy Fund are associated (or correlated) with New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Commodities Strategy i.e., Commodities Strategy and New Economy go up and down completely randomly.
Pair Corralation between Commodities Strategy and New Economy
Assuming the 90 days horizon Commodities Strategy Fund is expected to generate 1.03 times more return on investment than New Economy. However, Commodities Strategy is 1.03 times more volatile than New Economy Fund. It trades about 0.49 of its potential returns per unit of risk. New Economy Fund is currently generating about 0.18 per unit of risk. If you would invest 2,927 in Commodities Strategy Fund on October 20, 2024 and sell it today you would earn a total of 261.00 from holding Commodities Strategy Fund or generate 8.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commodities Strategy Fund vs. New Economy Fund
Performance |
| Timeline |
| Commodities Strategy |
| New Economy Fund |
Commodities Strategy and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commodities Strategy and New Economy
The main advantage of trading using opposite Commodities Strategy and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commodities Strategy position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy's long position.| Commodities Strategy vs. Basic Materials Fund | Commodities Strategy vs. Energy Services Fund | Commodities Strategy vs. Energy Fund Investor | Commodities Strategy vs. Real Estate Fund |
| New Economy vs. Arrow Managed Futures | New Economy vs. L Abbett Fundamental | New Economy vs. Commodities Strategy Fund | New Economy vs. Locorr Market Trend |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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