Correlation Between Commodityrealreturn and Parametric Commodity

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

Diversification Opportunities for Commodityrealreturn and Parametric Commodity

0.97

Correlation Coefficient

Commodityrealreturn  Parametric Commodity

Almost no diversification

The 3 months correlation between Commodityrealreturn and Parametric is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Commodityrealreturn Strategy F and Parametric Modity Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parametric Commodity 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 Parametric Commodity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parametric Commodity has no effect on the direction of Commodityrealreturn i.e., Commodityrealreturn and Parametric Commodity go up and down completely randomly.

Pair Corralation between Commodityrealreturn and Parametric Commodity

Assuming the 90 days horizon Commodityrealreturn Strategy Fund is expected to generate 1.17 times more return on investment than Parametric Commodity. However, Commodityrealreturn is 1.17 times more volatile than Parametric Modity Strategy. It trades about 0.22 of its potential returns per unit of risk. Parametric Modity Strategy is currently generating about 0.21 per unit of risk. If you would invest  1,307  in Commodityrealreturn Strategy Fund on December 28, 2024 and sell it today you would earn a total of  114.00  from holding Commodityrealreturn Strategy Fund or generate 8.72% return on investment over 90 days.

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

Commodityrealreturn Strategy F  vs.  Parametric Modity Strategy

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 forward indicators, Commodityrealreturn may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Parametric Commodity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Parametric Modity Strategy are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Parametric Commodity may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Commodityrealreturn and Parametric Commodity

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

The idea behind Commodityrealreturn Strategy Fund and Parametric Modity Strategy 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.