Correlation Between ETRACS Monthly and ETRACS 2xMonthly

Can any of the company-specific risk be diversified away by investing in both ETRACS Monthly and ETRACS 2xMonthly 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 2xMonthly 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 2xMonthly Pay, you can compare the effects of market volatilities on ETRACS Monthly and ETRACS 2xMonthly 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 2xMonthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS Monthly and ETRACS 2xMonthly.

Diversification Opportunities for ETRACS Monthly and ETRACS 2xMonthly

0.3

Correlation Coefficient

ETRACS Monthly  ETRACS 2xMonthly

Weak diversification

The 3 months correlation between ETRACS and ETRACS is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS Monthly Pay and ETRACS 2xMonthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS 2xMonthly 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 2xMonthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS 2xMonthly Pay has no effect on the direction of ETRACS Monthly i.e., ETRACS Monthly and ETRACS 2xMonthly go up and down completely randomly.

Pair Corralation between ETRACS Monthly and ETRACS 2xMonthly

Given the investment horizon of 90 days ETRACS Monthly Pay is expected to generate 1.09 times more return on investment than ETRACS 2xMonthly. However, ETRACS Monthly is 1.09 times more volatile than ETRACS 2xMonthly Pay. It trades about 0.11 of its potential returns per unit of risk. ETRACS 2xMonthly Pay is currently generating about -0.01 per unit of risk. If you would invest  1,483  in ETRACS Monthly Pay on December 28, 2024 and sell it today you would earn a total of  154.00  from holding ETRACS Monthly Pay or generate 10.38% return on investment over 90 days.

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

ETRACS Monthly Pay  vs.  ETRACS 2xMonthly 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 2xMonthly Pay

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETRACS 2xMonthly Pay has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, ETRACS 2xMonthly is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ETRACS Monthly and ETRACS 2xMonthly

The main advantage of trading using opposite ETRACS Monthly and ETRACS 2xMonthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS Monthly position performs unexpectedly, ETRACS 2xMonthly 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 2xMonthly will offset losses from the drop in ETRACS 2xMonthly's long position.

The idea behind ETRACS Monthly Pay and ETRACS 2xMonthly 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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.