Correlation Between T Rex and US Treasury

Can any of the company-specific risk be diversified away by investing in both T Rex and US Treasury 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 T Rex and US Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between T Rex 2X Long and US Treasury 30, you can compare the effects of market volatilities on T Rex and US Treasury 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 T Rex with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rex and US Treasury.

Diversification Opportunities for T Rex and US Treasury

0.16

Correlation Coefficient

T Rex  US Treasury

Average diversification

The 3 months correlation between NVDX and UTHY is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding T Rex 2X Long and US Treasury 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 30 and T Rex 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 T Rex 2X Long are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 30 has no effect on the direction of T Rex i.e., T Rex and US Treasury go up and down completely randomly.

Pair Corralation between T Rex and US Treasury

Given the investment horizon of 90 days T Rex 2X Long is expected to under-perform the US Treasury. In addition to that, T Rex is 9.12 times more volatile than US Treasury 30. It trades about -0.03 of its total potential returns per unit of risk. US Treasury 30 is currently generating about -0.04 per unit of volatility. If you would invest  4,430  in US Treasury 30 on November 28, 2024 and sell it today you would lose (85.00) from holding US Treasury 30 or give up 1.92% of portfolio value over 90 days.

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

T Rex 2X Long  vs.  US Treasury 30

T Rex 2X

Risk-Adjusted Performance

Very Weak

Over the last 90 days T Rex 2X Long has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

US Treasury 30

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Treasury 30 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, US Treasury is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with T Rex and US Treasury

The main advantage of trading using opposite T Rex and US Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rex position performs unexpectedly, US Treasury 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 US Treasury will offset losses from the drop in US Treasury's long position.

The idea behind T Rex 2X Long and US Treasury 30 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.