Correlation Between Strengthening Dollar and Rising Dollar
Can any of the company-specific risk be diversified away by investing in both Strengthening Dollar and Rising Dollar 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 Strengthening Dollar and Rising Dollar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strengthening Dollar 2x and Rising Dollar Profund, you can compare the effects of market volatilities on Strengthening Dollar and Rising Dollar 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 Strengthening Dollar with a short position of Rising Dollar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strengthening Dollar and Rising Dollar.
Diversification Opportunities for Strengthening Dollar and Rising Dollar
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Strengthening and Rising is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Strengthening Dollar 2x and Rising Dollar Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rising Dollar Profund and Strengthening Dollar 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 Strengthening Dollar 2x are associated (or correlated) with Rising Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rising Dollar Profund has no effect on the direction of Strengthening Dollar i.e., Strengthening Dollar and Rising Dollar go up and down completely randomly.
Pair Corralation between Strengthening Dollar and Rising Dollar
Assuming the 90 days horizon Strengthening Dollar 2x is expected to generate 1.96 times more return on investment than Rising Dollar. However, Strengthening Dollar is 1.96 times more volatile than Rising Dollar Profund. It trades about 0.07 of its potential returns per unit of risk. Rising Dollar Profund is currently generating about 0.07 per unit of risk. If you would invest 6,290 in Strengthening Dollar 2x on September 2, 2024 and sell it today you would earn a total of 396.00 from holding Strengthening Dollar 2x or generate 6.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strengthening Dollar 2x vs. Rising Dollar Profund
Performance |
| Timeline |
| Strengthening Dollar |
| Rising Dollar Profund |
Strengthening Dollar and Rising Dollar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strengthening Dollar and Rising Dollar
The main advantage of trading using opposite Strengthening Dollar and Rising Dollar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strengthening Dollar position performs unexpectedly, Rising Dollar 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 Rising Dollar will offset losses from the drop in Rising Dollar's long position.| Strengthening Dollar vs. Basic Materials Fund | Strengthening Dollar vs. Basic Materials Fund | Strengthening Dollar vs. Banking Fund Class | Strengthening Dollar vs. Basic Materials Fund |
| Rising Dollar vs. Short Real Estate | Rising Dollar vs. Short Real Estate | Rising Dollar vs. Ultrashort Mid Cap Profund | Rising Dollar vs. Ultrashort Mid Cap Profund |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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