Correlation Between 10 Year and US Dollar
Can any of the company-specific risk be diversified away by investing in both 10 Year and US Dollar 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 10 Year and US Dollar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 10 Year T Note Futures and US Dollar, you can compare the effects of market volatilities on 10 Year and US Dollar 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 10 Year with a short position of US Dollar. Check out your portfolio center. Please also check ongoing floating volatility patterns of 10 Year and US Dollar.
Diversification Opportunities for 10 Year and US Dollar
Pay attention - limited upside
The 3 months correlation between ZNUSD and DXUSD is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding 10 Year T Note Futures and US Dollar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Dollar and 10 Year 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 10 Year T Note Futures are associated (or correlated) with US Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Dollar has no effect on the direction of 10 Year i.e., 10 Year and US Dollar go up and down completely randomly.
Pair Corralation between 10 Year and US Dollar
Assuming the 90 days horizon 10 Year T Note Futures is expected to under-perform the US Dollar. In addition to that, 10 Year is 1.03 times more volatile than US Dollar. It trades about -0.03 of its total potential returns per unit of risk. US Dollar is currently generating about 0.07 per unit of volatility. If you would invest 10,103 in US Dollar on August 25, 2024 and sell it today you would earn a total of 600.00 from holding US Dollar or generate 5.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
10 Year T Note Futures vs. US Dollar
Performance |
| Timeline |
| 10 Year T |
| US Dollar |
10 Year and US Dollar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 10 Year and US Dollar
The main advantage of trading using opposite 10 Year and US Dollar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 10 Year position performs unexpectedly, US Dollar 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 US Dollar will offset losses from the drop in US Dollar's long position.The idea behind 10 Year T Note Futures and US Dollar 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.| US Dollar vs. 10 Year T Note Futures | US Dollar vs. Nasdaq 100 | US Dollar vs. Oat Futures | US Dollar vs. Wheat Futures |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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