Correlation Between Commodities Strategy and Floating Rate
Can any of the company-specific risk be diversified away by investing in both Commodities Strategy and Floating Rate 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 Floating Rate 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 Floating Rate Fund, you can compare the effects of market volatilities on Commodities Strategy and Floating Rate 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 Floating Rate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commodities Strategy and Floating Rate.
Diversification Opportunities for Commodities Strategy and Floating Rate
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Commodities and Floating is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Commodities Strategy Fund and Floating Rate Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floating Rate 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 Floating Rate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Floating Rate has no effect on the direction of Commodities Strategy i.e., Commodities Strategy and Floating Rate go up and down completely randomly.
Pair Corralation between Commodities Strategy and Floating Rate
Assuming the 90 days horizon Commodities Strategy Fund is expected to under-perform the Floating Rate. In addition to that, Commodities Strategy is 6.59 times more volatile than Floating Rate Fund. It trades about -0.01 of its total potential returns per unit of risk. Floating Rate Fund is currently generating about 0.17 per unit of volatility. If you would invest 791.00 in Floating Rate Fund on September 3, 2024 and sell it today you would earn a total of 28.00 from holding Floating Rate Fund or generate 3.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commodities Strategy Fund vs. Floating Rate Fund
Performance |
| Timeline |
| Commodities Strategy |
| Floating Rate |
Commodities Strategy and Floating Rate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commodities Strategy and Floating Rate
The main advantage of trading using opposite Commodities Strategy and Floating Rate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commodities Strategy position performs unexpectedly, Floating Rate 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 Floating Rate will offset losses from the drop in Floating Rate's long position.The idea behind Commodities Strategy Fund and Floating Rate Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Floating Rate vs. Commodities Strategy Fund | Floating Rate vs. Balanced Fund Investor | Floating Rate vs. Auer Growth Fund | Floating Rate vs. Vanguard Windsor 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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