Correlation Between IPath Series and ETRACS 2xMonthly
Can any of the company-specific risk be diversified away by investing in both IPath Series and ETRACS 2xMonthly 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 IPath Series and ETRACS 2xMonthly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iPath Series B and ETRACS 2xMonthly Pay, you can compare the effects of market volatilities on IPath Series and ETRACS 2xMonthly 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 IPath Series with a short position of ETRACS 2xMonthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPath Series and ETRACS 2xMonthly.
Diversification Opportunities for IPath Series and ETRACS 2xMonthly
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between IPath and ETRACS is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding iPath Series B and ETRACS 2xMonthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS 2xMonthly Pay and IPath Series 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 iPath Series B are associated (or correlated) with ETRACS 2xMonthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS 2xMonthly Pay has no effect on the direction of IPath Series i.e., IPath Series and ETRACS 2xMonthly go up and down completely randomly.
Pair Corralation between IPath Series and ETRACS 2xMonthly
Considering the 90-day investment horizon iPath Series B is expected to under-perform the ETRACS 2xMonthly. In addition to that, IPath Series is 1.41 times more volatile than ETRACS 2xMonthly Pay. It trades about -0.03 of its total potential returns per unit of risk. ETRACS 2xMonthly Pay is currently generating about 0.06 per unit of volatility. If you would invest 841.00 in ETRACS 2xMonthly Pay on August 26, 2024 and sell it today you would earn a total of 156.00 from holding ETRACS 2xMonthly Pay or generate 18.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iPath Series B vs. ETRACS 2xMonthly Pay
Performance |
| Timeline |
| iPath Series B |
| ETRACS 2xMonthly Pay |
IPath Series and ETRACS 2xMonthly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPath Series and ETRACS 2xMonthly
The main advantage of trading using opposite IPath Series and ETRACS 2xMonthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPath Series position performs unexpectedly, ETRACS 2xMonthly 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 2xMonthly will offset losses from the drop in ETRACS 2xMonthly's long position.| IPath Series vs. ProShares VIX Mid Term | IPath Series vs. ProShares VIX Short Term | IPath Series vs. iPath Series B | IPath Series vs. ProShares Short VIX |
| ETRACS 2xMonthly vs. ProShares VIX Short Term | ETRACS 2xMonthly vs. ProShares UltraShort Yen | ETRACS 2xMonthly vs. iPath Series B |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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