Correlation Between International Drawdown and ETC 6

Can any of the company-specific risk be diversified away by investing in both International Drawdown and ETC 6 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 International Drawdown and ETC 6 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between International Drawdown Managed and ETC 6 Meridian, you can compare the effects of market volatilities on International Drawdown and ETC 6 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 International Drawdown with a short position of ETC 6. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Drawdown and ETC 6.

Diversification Opportunities for International Drawdown and ETC 6

-0.34

Correlation Coefficient

International Drawdown  ETC 6

Very good diversification

The 3 months correlation between International and ETC is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding International Drawdown Managed and ETC 6 Meridian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETC 6 Meridian and International Drawdown 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 International Drawdown Managed are associated (or correlated) with ETC 6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETC 6 Meridian has no effect on the direction of International Drawdown i.e., International Drawdown and ETC 6 go up and down completely randomly.

Pair Corralation between International Drawdown and ETC 6

Given the investment horizon of 90 days International Drawdown is expected to generate 1.47 times less return on investment than ETC 6. In addition to that, International Drawdown is 2.17 times more volatile than ETC 6 Meridian. It trades about 0.02 of its total potential returns per unit of risk. ETC 6 Meridian is currently generating about 0.06 per unit of volatility. If you would invest  3,684  in ETC 6 Meridian on September 13, 2024 and sell it today you would earn a total of  44.00  from holding ETC 6 Meridian or generate 1.19% return on investment over 90 days.

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

International Drawdown Managed  vs.  ETC 6 Meridian

International Drawdown

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Drawdown Managed are ranked lower than 1 (%) 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.

ETC 6 Meridian

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ETC 6 Meridian are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, ETC 6 is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with International Drawdown and ETC 6

The main advantage of trading using opposite International Drawdown and ETC 6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Drawdown position performs unexpectedly, ETC 6 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 ETC 6 will offset losses from the drop in ETC 6's long position.

The idea behind International Drawdown Managed and ETC 6 Meridian 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.