Correlation Between STF Tactical and MKAM ETF
Can any of the company-specific risk be diversified away by investing in both STF Tactical and MKAM ETF 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 STF Tactical and MKAM ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STF Tactical Growth and MKAM ETF, you can compare the effects of market volatilities on STF Tactical and MKAM ETF 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 STF Tactical with a short position of MKAM ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of STF Tactical and MKAM ETF.
Diversification Opportunities for STF Tactical and MKAM ETF
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STF and MKAM is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding STF Tactical Growth and MKAM ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MKAM ETF and STF Tactical 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 STF Tactical Growth are associated (or correlated) with MKAM ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MKAM ETF has no effect on the direction of STF Tactical i.e., STF Tactical and MKAM ETF go up and down completely randomly.
Pair Corralation between STF Tactical and MKAM ETF
Considering the 90-day investment horizon STF Tactical Growth is expected to under-perform the MKAM ETF. In addition to that, STF Tactical is 2.77 times more volatile than MKAM ETF. It trades about -0.01 of its total potential returns per unit of risk. MKAM ETF is currently generating about 0.04 per unit of volatility. If you would invest 2,943 in MKAM ETF on October 23, 2024 and sell it today you would earn a total of 9.00 from holding MKAM ETF or generate 0.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STF Tactical Growth vs. MKAM ETF
Performance |
| Timeline |
| STF Tactical Growth |
| MKAM ETF |
STF Tactical and MKAM ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STF Tactical and MKAM ETF
The main advantage of trading using opposite STF Tactical and MKAM ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STF Tactical position performs unexpectedly, MKAM ETF 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 MKAM ETF will offset losses from the drop in MKAM ETF's long position.The idea behind STF Tactical Growth and MKAM ETF 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.| MKAM ETF vs. FT Vest Equity | MKAM ETF vs. Northern Lights | MKAM ETF vs. Dimensional International High | MKAM ETF vs. JPMorgan Fundamental Data |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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