Correlation Between SmartETFs Dividend and FIRE Funds

Can any of the company-specific risk be diversified away by investing in both SmartETFs Dividend and FIRE Funds 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 SmartETFs Dividend and FIRE Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SmartETFs Dividend Builder and FIRE Funds Wealth, you can compare the effects of market volatilities on SmartETFs Dividend and FIRE Funds 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 SmartETFs Dividend with a short position of FIRE Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of SmartETFs Dividend and FIRE Funds.

Diversification Opportunities for SmartETFs Dividend and FIRE Funds

0.26

Correlation Coefficient

SmartETFs Dividend  FIRE Funds

Modest diversification

The 3 months correlation between SmartETFs and FIRE is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding SmartETFs Dividend Builder and FIRE Funds Wealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRE Funds Wealth and SmartETFs Dividend 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 SmartETFs Dividend Builder are associated (or correlated) with FIRE Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRE Funds Wealth has no effect on the direction of SmartETFs Dividend i.e., SmartETFs Dividend and FIRE Funds go up and down completely randomly.

Pair Corralation between SmartETFs Dividend and FIRE Funds

Given the investment horizon of 90 days SmartETFs Dividend Builder is expected to generate 1.44 times more return on investment than FIRE Funds. However, SmartETFs Dividend is 1.44 times more volatile than FIRE Funds Wealth. It trades about 0.09 of its potential returns per unit of risk. FIRE Funds Wealth is currently generating about 0.03 per unit of risk. If you would invest  2,866  in SmartETFs Dividend Builder on December 21, 2024 and sell it today you would earn a total of  109.68  from holding SmartETFs Dividend Builder or generate 3.83% return on investment over 90 days.

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

SmartETFs Dividend Builder  vs.  FIRE Funds Wealth

SmartETFs Dividend

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SmartETFs Dividend Builder are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SmartETFs Dividend is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

FIRE Funds Wealth

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FIRE Funds Wealth are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, FIRE Funds is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SmartETFs Dividend and FIRE Funds

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

The idea behind SmartETFs Dividend Builder and FIRE Funds Wealth 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.