Correlation Between STRAX and NAV
Can any of the company-specific risk be diversified away by investing in both STRAX and NAV 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 STRAX and NAV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STRAX and NAV, you can compare the effects of market volatilities on STRAX and NAV 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 STRAX with a short position of NAV. Check out your portfolio center. Please also check ongoing floating volatility patterns of STRAX and NAV.
Diversification Opportunities for STRAX and NAV
Very good diversification
The 3 months correlation between STRAX and NAV is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding STRAX and NAV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAV and STRAX 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 STRAX are associated (or correlated) with NAV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAV has no effect on the direction of STRAX i.e., STRAX and NAV go up and down completely randomly.
Pair Corralation between STRAX and NAV
Assuming the 90 days trading horizon STRAX is expected to under-perform the NAV. But the crypto coin apears to be less risky and, when comparing its historical volatility, STRAX is 4.13 times less risky than NAV. The crypto coin trades about -0.04 of its potential returns per unit of risk. The NAV is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 11.00 in NAV on August 27, 2024 and sell it today you would lose (8.16) from holding NAV or give up 74.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STRAX vs. NAV
Performance |
| Timeline |
| STRAX |
| NAV |
STRAX and NAV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STRAX and NAV
The main advantage of trading using opposite STRAX and NAV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STRAX position performs unexpectedly, NAV 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 NAV will offset losses from the drop in NAV's long position.The idea behind STRAX and NAV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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