Correlation Between Commodities Strategy and Regional Bank
Can any of the company-specific risk be diversified away by investing in both Commodities Strategy and Regional Bank 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 Regional Bank 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 Regional Bank Fund, you can compare the effects of market volatilities on Commodities Strategy and Regional Bank 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 Regional Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commodities Strategy and Regional Bank.
Diversification Opportunities for Commodities Strategy and Regional Bank
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Commodities and Regional is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Commodities Strategy Fund and Regional Bank Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Bank 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 Regional Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Bank has no effect on the direction of Commodities Strategy i.e., Commodities Strategy and Regional Bank go up and down completely randomly.
Pair Corralation between Commodities Strategy and Regional Bank
Assuming the 90 days horizon Commodities Strategy Fund is expected to generate 1.04 times more return on investment than Regional Bank. However, Commodities Strategy is 1.04 times more volatile than Regional Bank Fund. It trades about 0.19 of its potential returns per unit of risk. Regional Bank Fund is currently generating about -0.05 per unit of risk. If you would invest 2,885 in Commodities Strategy Fund on September 13, 2024 and sell it today you would earn a total of 93.00 from holding Commodities Strategy Fund or generate 3.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commodities Strategy Fund vs. Regional Bank Fund
Performance |
| Timeline |
| Commodities Strategy |
| Regional Bank |
Commodities Strategy and Regional Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commodities Strategy and Regional Bank
The main advantage of trading using opposite Commodities Strategy and Regional Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commodities Strategy position performs unexpectedly, Regional Bank 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 Regional Bank will offset losses from the drop in Regional Bank'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 |
| Regional Bank vs. Rbc Microcap Value | Regional Bank vs. Rbb Fund | Regional Bank vs. Leggmason Partners Institutional | Regional Bank vs. Arrow Managed Futures |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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