Correlation Between Commodityrealreturn and Financial Industries

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

By analyzing existing cross correlation between Commodityrealreturn Strategy Fund and Financial Industries Fund, you can compare the effects of market volatilities on Commodityrealreturn and Financial Industries 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 Commodityrealreturn with a short position of Financial Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commodityrealreturn and Financial Industries.

Diversification Opportunities for Commodityrealreturn and Financial Industries

-0.01

Correlation Coefficient

Commodityrealreturn  Financial Industries

Good diversification

The 3 months correlation between Commodityrealreturn and Financial is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Commodityrealreturn Strategy F and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries and Commodityrealreturn 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 Commodityrealreturn Strategy Fund are associated (or correlated) with Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Commodityrealreturn i.e., Commodityrealreturn and Financial Industries go up and down completely randomly.

Pair Corralation between Commodityrealreturn and Financial Industries

Assuming the 90 days horizon Commodityrealreturn Strategy Fund is expected to generate 0.56 times more return on investment than Financial Industries. However, Commodityrealreturn Strategy Fund is 1.8 times less risky than Financial Industries. It trades about 0.23 of its potential returns per unit of risk. Financial Industries Fund is currently generating about 0.01 per unit of risk. If you would invest  1,071  in Commodityrealreturn Strategy Fund on December 27, 2024 and sell it today you would earn a total of  101.00  from holding Commodityrealreturn Strategy Fund or generate 9.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Commodityrealreturn Strategy F  vs.  Financial Industries Fund

Commodityrealreturn

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Commodityrealreturn Strategy Fund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Commodityrealreturn may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Financial Industries

Risk-Adjusted Performance

Weak

Over the last 90 days Financial Industries Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Financial Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Commodityrealreturn and Financial Industries

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

The idea behind Commodityrealreturn Strategy Fund and Financial Industries Fund 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.