Correlation Between Commodities Strategy and Monthly Rebalance
Can any of the company-specific risk be diversified away by investing in both Commodities Strategy and Monthly Rebalance 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 Monthly Rebalance 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 Monthly Rebalance Nasdaq 100, you can compare the effects of market volatilities on Commodities Strategy and Monthly Rebalance 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 Monthly Rebalance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commodities Strategy and Monthly Rebalance.
Diversification Opportunities for Commodities Strategy and Monthly Rebalance
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Commodities and Monthly is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Commodities Strategy Fund and Monthly Rebalance Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monthly Rebalance 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 Monthly Rebalance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monthly Rebalance has no effect on the direction of Commodities Strategy i.e., Commodities Strategy and Monthly Rebalance go up and down completely randomly.
Pair Corralation between Commodities Strategy and Monthly Rebalance
Assuming the 90 days horizon Commodities Strategy is expected to generate 7.01 times less return on investment than Monthly Rebalance. But when comparing it to its historical volatility, Commodities Strategy Fund is 2.32 times less risky than Monthly Rebalance. It trades about 0.03 of its potential returns per unit of risk. Monthly Rebalance Nasdaq 100 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 43,471 in Monthly Rebalance Nasdaq 100 on September 12, 2024 and sell it today you would earn a total of 22,641 from holding Monthly Rebalance Nasdaq 100 or generate 52.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Commodities Strategy Fund vs. Monthly Rebalance Nasdaq 100
Performance |
| Timeline |
| Commodities Strategy |
| Monthly Rebalance |
Commodities Strategy and Monthly Rebalance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commodities Strategy and Monthly Rebalance
The main advantage of trading using opposite Commodities Strategy and Monthly Rebalance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commodities Strategy position performs unexpectedly, Monthly Rebalance 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 Monthly Rebalance will offset losses from the drop in Monthly Rebalance'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 |
| Monthly Rebalance vs. Invesco Energy Fund | Monthly Rebalance vs. Alpsalerian Energy Infrastructure | Monthly Rebalance vs. Oil Gas Ultrasector | Monthly Rebalance vs. Energy Basic Materials |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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