Correlation Between ETRACS Monthly and Credit Suisse

Can any of the company-specific risk be diversified away by investing in both ETRACS Monthly and Credit Suisse 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 Credit Suisse 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 Credit Suisse X Links, you can compare the effects of market volatilities on ETRACS Monthly and Credit Suisse 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 Credit Suisse. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS Monthly and Credit Suisse.

Diversification Opportunities for ETRACS Monthly and Credit Suisse

-0.71

Correlation Coefficient

ETRACS Monthly  Credit Suisse

Pay attention - limited upside

The 3 months correlation between ETRACS and Credit is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS Monthly Pay and Credit Suisse X Links in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Suisse X 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 Credit Suisse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Suisse X has no effect on the direction of ETRACS Monthly i.e., ETRACS Monthly and Credit Suisse go up and down completely randomly.

Pair Corralation between ETRACS Monthly and Credit Suisse

Given the investment horizon of 90 days ETRACS Monthly Pay is expected to generate 1.62 times more return on investment than Credit Suisse. However, ETRACS Monthly is 1.62 times more volatile than Credit Suisse X Links. It trades about 0.19 of its potential returns per unit of risk. Credit Suisse X Links is currently generating about -0.02 per unit of risk. If you would invest  1,288  in ETRACS Monthly Pay on December 28, 2024 and sell it today you would earn a total of  274.00  from holding ETRACS Monthly Pay or generate 21.27% return on investment over 90 days.

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

ETRACS Monthly Pay  vs.  Credit Suisse X Links

ETRACS Monthly Pay

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Monthly Pay are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, ETRACS Monthly sustained solid returns over the last few months and may actually be approaching a breakup point.

Credit Suisse X

Risk-Adjusted Performance

Very Weak

Over the last 90 days Credit Suisse X Links has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Credit Suisse is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ETRACS Monthly and Credit Suisse

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

The idea behind ETRACS Monthly Pay and Credit Suisse X Links 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.