Correlation Between ETRACS 2xMonthly and ETRACS Quarterly
Can any of the company-specific risk be diversified away by investing in both ETRACS 2xMonthly and ETRACS Quarterly 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 2xMonthly and ETRACS Quarterly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETRACS 2xMonthly Pay and ETRACS Quarterly Pay, you can compare the effects of market volatilities on ETRACS 2xMonthly and ETRACS Quarterly 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 2xMonthly with a short position of ETRACS Quarterly. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS 2xMonthly and ETRACS Quarterly.
Diversification Opportunities for ETRACS 2xMonthly and ETRACS Quarterly
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ETRACS and ETRACS is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS 2xMonthly Pay and ETRACS Quarterly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Quarterly Pay and ETRACS 2xMonthly 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 2xMonthly Pay are associated (or correlated) with ETRACS Quarterly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Quarterly Pay has no effect on the direction of ETRACS 2xMonthly i.e., ETRACS 2xMonthly and ETRACS Quarterly go up and down completely randomly.
Pair Corralation between ETRACS 2xMonthly and ETRACS Quarterly
Given the investment horizon of 90 days ETRACS 2xMonthly Pay is expected to generate 2.84 times more return on investment than ETRACS Quarterly. However, ETRACS 2xMonthly is 2.84 times more volatile than ETRACS Quarterly Pay. It trades about 0.11 of its potential returns per unit of risk. ETRACS Quarterly Pay is currently generating about 0.3 per unit of risk. If you would invest 496.00 in ETRACS 2xMonthly Pay on October 20, 2024 and sell it today you would earn a total of 26.00 from holding ETRACS 2xMonthly Pay or generate 5.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETRACS 2xMonthly Pay vs. ETRACS Quarterly Pay
Performance |
| Timeline |
| ETRACS 2xMonthly Pay |
| ETRACS Quarterly Pay |
ETRACS 2xMonthly and ETRACS Quarterly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETRACS 2xMonthly and ETRACS Quarterly
The main advantage of trading using opposite ETRACS 2xMonthly and ETRACS Quarterly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS 2xMonthly position performs unexpectedly, ETRACS Quarterly 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 ETRACS Quarterly will offset losses from the drop in ETRACS Quarterly's long position.| ETRACS 2xMonthly vs. ETRACS Monthly Pay | ETRACS 2xMonthly vs. ETRACS 2xMonthly Pay | ETRACS 2xMonthly vs. ETRACS Monthly Pay | ETRACS 2xMonthly vs. ETRACS Monthly Pay |
| ETRACS Quarterly vs. ETRACS Monthly Pay | ETRACS Quarterly vs. ETRACS Monthly Pay | ETRACS Quarterly vs. ETRACS Monthly Pay | ETRACS Quarterly vs. iShares Trust |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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