Correlation Between Main Buywrite and International Drawdown

Can any of the company-specific risk be diversified away by investing in both Main Buywrite and International Drawdown 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 Main Buywrite and International Drawdown into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Main Buywrite ETF and International Drawdown Managed, you can compare the effects of market volatilities on Main Buywrite and International Drawdown 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 Main Buywrite with a short position of International Drawdown. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Buywrite and International Drawdown.

Diversification Opportunities for Main Buywrite and International Drawdown

0.03

Correlation Coefficient

Main Buywrite  International Drawdown

Significant diversification

The 3 months correlation between Main and International is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Main Buywrite ETF and International Drawdown Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Drawdown and Main Buywrite 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 Main Buywrite ETF are associated (or correlated) with International Drawdown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Drawdown has no effect on the direction of Main Buywrite i.e., Main Buywrite and International Drawdown go up and down completely randomly.

Pair Corralation between Main Buywrite and International Drawdown

Given the investment horizon of 90 days Main Buywrite ETF is expected to under-perform the International Drawdown. But the etf apears to be less risky and, when comparing its historical volatility, Main Buywrite ETF is 1.75 times less risky than International Drawdown. The etf trades about -0.03 of its potential returns per unit of risk. The International Drawdown Managed is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,000  in International Drawdown Managed on December 29, 2024 and sell it today you would earn a total of  99.00  from holding International Drawdown Managed or generate 4.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Main Buywrite ETF  vs.  International Drawdown Managed

Main Buywrite ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Main Buywrite ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Main Buywrite is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

International Drawdown

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Drawdown Managed are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, International Drawdown is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Main Buywrite and International Drawdown

The main advantage of trading using opposite Main Buywrite and International Drawdown positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Buywrite position performs unexpectedly, International Drawdown 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 International Drawdown will offset losses from the drop in International Drawdown's long position.

The idea behind Main Buywrite ETF and International Drawdown Managed 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.