Correlation Between Commodities Strategy and Asset Allocation
Can any of the company-specific risk be diversified away by investing in both Commodities Strategy and Asset Allocation 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 Asset Allocation 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 Asset Allocation Fund, you can compare the effects of market volatilities on Commodities Strategy and Asset Allocation 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 Asset Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commodities Strategy and Asset Allocation.
Diversification Opportunities for Commodities Strategy and Asset Allocation
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Commodities and Asset is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Commodities Strategy Fund and Asset Allocation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asset Allocation 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 Asset Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asset Allocation has no effect on the direction of Commodities Strategy i.e., Commodities Strategy and Asset Allocation go up and down completely randomly.
Pair Corralation between Commodities Strategy and Asset Allocation
Assuming the 90 days horizon Commodities Strategy is expected to generate 8.63 times less return on investment than Asset Allocation. In addition to that, Commodities Strategy is 1.82 times more volatile than Asset Allocation Fund. It trades about 0.02 of its total potential returns per unit of risk. Asset Allocation Fund is currently generating about 0.35 per unit of volatility. If you would invest 1,211 in Asset Allocation Fund on September 2, 2024 and sell it today you would earn a total of 45.00 from holding Asset Allocation Fund or generate 3.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commodities Strategy Fund vs. Asset Allocation Fund
Performance |
| Timeline |
| Commodities Strategy |
| Asset Allocation |
Commodities Strategy and Asset Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commodities Strategy and Asset Allocation
The main advantage of trading using opposite Commodities Strategy and Asset Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commodities Strategy position performs unexpectedly, Asset Allocation 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 Asset Allocation will offset losses from the drop in Asset Allocation'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 |
| Asset Allocation vs. Rbc Funds Trust | Asset Allocation vs. Shelton Funds | Asset Allocation vs. Qs Growth Fund | Asset Allocation vs. Vanguard Small Cap Growth |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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