Correlation Between Grizzly Short and Inverse Dow

Can any of the company-specific risk be diversified away by investing in both Grizzly Short and Inverse Dow 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 Grizzly Short and Inverse Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Grizzly Short Fund and Inverse Dow 2x, you can compare the effects of market volatilities on Grizzly Short and Inverse Dow 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 Grizzly Short with a short position of Inverse Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grizzly Short and Inverse Dow.

Diversification Opportunities for Grizzly Short and Inverse Dow

0.75

Correlation Coefficient

Grizzly Short  Inverse Dow

Poor diversification

The 3 months correlation between Grizzly and Inverse is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Grizzly Short Fund and Inverse Dow 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Dow 2x and Grizzly Short 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 Grizzly Short Fund are associated (or correlated) with Inverse Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Dow 2x has no effect on the direction of Grizzly Short i.e., Grizzly Short and Inverse Dow go up and down completely randomly.

Pair Corralation between Grizzly Short and Inverse Dow

Assuming the 90 days horizon Grizzly Short is expected to generate 2.09 times less return on investment than Inverse Dow. But when comparing it to its historical volatility, Grizzly Short Fund is 1.74 times less risky than Inverse Dow. It trades about 0.05 of its potential returns per unit of risk. Inverse Dow 2x is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11,705  in Inverse Dow 2x on December 21, 2024 and sell it today you would earn a total of  598.00  from holding Inverse Dow 2x or generate 5.11% return on investment over 90 days.

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

Grizzly Short Fund  vs.  Inverse Dow 2x

Grizzly Short

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grizzly Short Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Grizzly Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Inverse Dow 2x

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Dow 2x are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Inverse Dow is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Grizzly Short and Inverse Dow

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

The idea behind Grizzly Short Fund and Inverse Dow 2x 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.