Correlation Between ETRACS 2x and Freedom Day
Can any of the company-specific risk be diversified away by investing in both ETRACS 2x and Freedom Day 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 ETRACS 2x and Freedom Day into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETRACS 2x Leveraged and Freedom Day Dividend, you can compare the effects of market volatilities on ETRACS 2x and Freedom Day 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 ETRACS 2x with a short position of Freedom Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS 2x and Freedom Day.
Diversification Opportunities for ETRACS 2x and Freedom Day
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ETRACS and Freedom is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS 2x Leveraged and Freedom Day Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Day Dividend and ETRACS 2x 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 ETRACS 2x Leveraged are associated (or correlated) with Freedom Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Day Dividend has no effect on the direction of ETRACS 2x i.e., ETRACS 2x and Freedom Day go up and down completely randomly.
Pair Corralation between ETRACS 2x and Freedom Day
Given the investment horizon of 90 days ETRACS 2x Leveraged is expected to generate 1.84 times more return on investment than Freedom Day. However, ETRACS 2x is 1.84 times more volatile than Freedom Day Dividend. It trades about 0.08 of its potential returns per unit of risk. Freedom Day Dividend is currently generating about 0.13 per unit of risk. If you would invest 2,993 in ETRACS 2x Leveraged on September 2, 2024 and sell it today you would earn a total of 1,490 from holding ETRACS 2x Leveraged or generate 49.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETRACS 2x Leveraged vs. Freedom Day Dividend
Performance |
| Timeline |
| ETRACS 2x Leveraged |
| Freedom Day Dividend |
ETRACS 2x and Freedom Day Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETRACS 2x and Freedom Day
The main advantage of trading using opposite ETRACS 2x and Freedom Day positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS 2x position performs unexpectedly, Freedom Day 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 Freedom Day will offset losses from the drop in Freedom Day's long position.| ETRACS 2x vs. Franklin Templeton ETF | ETRACS 2x vs. Altrius Global Dividend | ETRACS 2x vs. Invesco Exchange Traded | ETRACS 2x vs. Franklin International Core |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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