Correlation Between ETRACS 2xMonthly and ETRACS Monthly
Can any of the company-specific risk be diversified away by investing in both ETRACS 2xMonthly and ETRACS Monthly 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 Monthly 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 Monthly Pay, you can compare the effects of market volatilities on ETRACS 2xMonthly and ETRACS Monthly 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 Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS 2xMonthly and ETRACS Monthly.
Diversification Opportunities for ETRACS 2xMonthly and ETRACS Monthly
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ETRACS and ETRACS is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS 2xMonthly Pay and ETRACS Monthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Monthly 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 Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Monthly Pay has no effect on the direction of ETRACS 2xMonthly i.e., ETRACS 2xMonthly and ETRACS Monthly go up and down completely randomly.
Pair Corralation between ETRACS 2xMonthly and ETRACS Monthly
Given the investment horizon of 90 days ETRACS 2xMonthly Pay is expected to generate 2.72 times more return on investment than ETRACS Monthly. However, ETRACS 2xMonthly is 2.72 times more volatile than ETRACS Monthly Pay. It trades about 0.05 of its potential returns per unit of risk. ETRACS Monthly Pay is currently generating about 0.13 per unit of risk. If you would invest 525.00 in ETRACS 2xMonthly Pay on August 28, 2024 and sell it today you would earn a total of 69.00 from holding ETRACS 2xMonthly Pay or generate 13.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETRACS 2xMonthly Pay vs. ETRACS Monthly Pay
Performance |
| Timeline |
| ETRACS 2xMonthly Pay |
| ETRACS Monthly Pay |
ETRACS 2xMonthly and ETRACS Monthly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETRACS 2xMonthly and ETRACS Monthly
The main advantage of trading using opposite ETRACS 2xMonthly and ETRACS Monthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS 2xMonthly position performs unexpectedly, ETRACS Monthly 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 Monthly will offset losses from the drop in ETRACS Monthly'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 Monthly vs. ETRACS Quarterly Pay | ETRACS Monthly vs. Simplify Volatility Premium | ETRACS Monthly vs. ETRACS Monthly Pay | ETRACS Monthly 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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