Correlation Between Basic Materials and Trend Etf

Can any of the company-specific risk be diversified away by investing in both Basic Materials and Trend Etf 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 Basic Materials and Trend Etf into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Basic Materials and Trend Etf Ifix, you can compare the effects of market volatilities on Basic Materials and Trend Etf 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 Basic Materials with a short position of Trend Etf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Trend Etf.

Diversification Opportunities for Basic Materials and Trend Etf

-0.17

Correlation Coefficient

Basic Materials  Trend Etf

Good diversification

The 3 months correlation between Basic and Trend is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Trend Etf Ifix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trend Etf Ifix and Basic Materials 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 Basic Materials are associated (or correlated) with Trend Etf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trend Etf Ifix has no effect on the direction of Basic Materials i.e., Basic Materials and Trend Etf go up and down completely randomly.

Pair Corralation between Basic Materials and Trend Etf

Assuming the 90 days trading horizon Basic Materials is expected to under-perform the Trend Etf. In addition to that, Basic Materials is 2.32 times more volatile than Trend Etf Ifix. It trades about -0.02 of its total potential returns per unit of risk. Trend Etf Ifix is currently generating about 0.17 per unit of volatility. If you would invest  1,110  in Trend Etf Ifix on December 30, 2024 and sell it today you would earn a total of  59.00  from holding Trend Etf Ifix or generate 5.32% return on investment over 90 days.

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

Basic Materials  vs.  Trend Etf Ifix

Pair Trading with Basic Materials and Trend Etf

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

The idea behind Basic Materials and Trend Etf Ifix 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.