Correlation Between ETRACS Monthly and ETRACS Quarterly

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

Diversification Opportunities for ETRACS Monthly and ETRACS Quarterly

0.8

Correlation Coefficient

ETRACS Monthly  ETRACS Quarterly

Very poor diversification

The 3 months correlation between ETRACS and ETRACS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS Monthly Pay and ETRACS Quarterly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Quarterly Pay 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 ETRACS Quarterly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Quarterly Pay has no effect on the direction of ETRACS Monthly i.e., ETRACS Monthly and ETRACS Quarterly go up and down completely randomly.

Pair Corralation between ETRACS Monthly and ETRACS Quarterly

Given the investment horizon of 90 days ETRACS Monthly is expected to generate 1.69 times less return on investment than ETRACS Quarterly. In addition to that, ETRACS Monthly is 1.04 times more volatile than ETRACS Quarterly Pay. It trades about 0.11 of its total potential returns per unit of risk. ETRACS Quarterly Pay is currently generating about 0.19 per unit of volatility. If you would invest  5,768  in ETRACS Quarterly Pay on December 28, 2024 and sell it today you would earn a total of  1,087  from holding ETRACS Quarterly Pay or generate 18.85% return on investment over 90 days.

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

ETRACS Monthly Pay  vs.  ETRACS Quarterly Pay

ETRACS Monthly Pay

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Monthly Pay are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, ETRACS Monthly may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ETRACS Quarterly Pay

Risk-Adjusted Performance

Good

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

Pair Trading with ETRACS Monthly and ETRACS Quarterly

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

The idea behind ETRACS Monthly Pay and ETRACS Quarterly Pay 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.