Correlation Between ETRACS Monthly and Optimize Strategy

Can any of the company-specific risk be diversified away by investing in both ETRACS Monthly and Optimize Strategy 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 ETRACS Monthly and Optimize Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ETRACS Monthly Pay and Optimize Strategy Index, you can compare the effects of market volatilities on ETRACS Monthly and Optimize Strategy 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 ETRACS Monthly with a short position of Optimize Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS Monthly and Optimize Strategy.

Diversification Opportunities for ETRACS Monthly and Optimize Strategy

0.62

Correlation Coefficient

ETRACS Monthly  Optimize Strategy

Poor diversification

The 3 months correlation between ETRACS and Optimize is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS Monthly Pay and Optimize Strategy Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimize Strategy Index and ETRACS Monthly 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 ETRACS Monthly Pay are associated (or correlated) with Optimize Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimize Strategy Index has no effect on the direction of ETRACS Monthly i.e., ETRACS Monthly and Optimize Strategy go up and down completely randomly.

Pair Corralation between ETRACS Monthly and Optimize Strategy

Given the investment horizon of 90 days ETRACS Monthly Pay is expected to generate 0.73 times more return on investment than Optimize Strategy. However, ETRACS Monthly Pay is 1.37 times less risky than Optimize Strategy. It trades about 0.0 of its potential returns per unit of risk. Optimize Strategy Index is currently generating about -0.12 per unit of risk. If you would invest  1,885  in ETRACS Monthly Pay on December 29, 2024 and sell it today you would lose (2.00) from holding ETRACS Monthly Pay or give up 0.11% of portfolio value over 90 days.

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

ETRACS Monthly Pay  vs.  Optimize Strategy Index

ETRACS Monthly Pay

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETRACS Monthly Pay has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ETRACS Monthly is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Optimize Strategy Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optimize Strategy Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with ETRACS Monthly and Optimize Strategy

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

The idea behind ETRACS Monthly Pay and Optimize Strategy Index 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.