Correlation Between ETRACS 2xMonthly and ERShares Entrepreneurs

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Can any of the company-specific risk be diversified away by investing in both ETRACS 2xMonthly and ERShares Entrepreneurs 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 2xMonthly and ERShares Entrepreneurs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETRACS 2xMonthly Pay and ERShares Entrepreneurs ETF, you can compare the effects of market volatilities on ETRACS 2xMonthly and ERShares Entrepreneurs 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 2xMonthly with a short position of ERShares Entrepreneurs. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS 2xMonthly and ERShares Entrepreneurs.

Diversification Opportunities for ETRACS 2xMonthly and ERShares Entrepreneurs

-0.8
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between ETRACS and ERShares is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS 2xMonthly Pay and ERShares Entrepreneurs ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ERShares Entrepreneurs and ETRACS 2xMonthly 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 2xMonthly Pay are associated (or correlated) with ERShares Entrepreneurs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ERShares Entrepreneurs has no effect on the direction of ETRACS 2xMonthly i.e., ETRACS 2xMonthly and ERShares Entrepreneurs go up and down completely randomly.

Pair Corralation between ETRACS 2xMonthly and ERShares Entrepreneurs

Given the investment horizon of 90 days ETRACS 2xMonthly Pay is expected to generate 0.63 times more return on investment than ERShares Entrepreneurs. However, ETRACS 2xMonthly Pay is 1.6 times less risky than ERShares Entrepreneurs. It trades about -0.12 of its potential returns per unit of risk. ERShares Entrepreneurs ETF is currently generating about -0.09 per unit of risk. If you would invest  984.00  in ETRACS 2xMonthly Pay on October 6, 2024 and sell it today you would lose (28.00) from holding ETRACS 2xMonthly Pay or give up 2.85% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy85.0%
ValuesDaily Returns

ETRACS 2xMonthly Pay  vs.  ERShares Entrepreneurs ETF

 Performance 
       Timeline  
ETRACS 2xMonthly Pay 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
ERShares Entrepreneurs 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ERShares Entrepreneurs ETF are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, ERShares Entrepreneurs reported solid returns over the last few months and may actually be approaching a breakup point.

ETRACS 2xMonthly and ERShares Entrepreneurs Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ETRACS 2xMonthly and ERShares Entrepreneurs

The main advantage of trading using opposite ETRACS 2xMonthly and ERShares Entrepreneurs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS 2xMonthly position performs unexpectedly, ERShares Entrepreneurs 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 ERShares Entrepreneurs will offset losses from the drop in ERShares Entrepreneurs' long position.
The idea behind ETRACS 2xMonthly Pay and ERShares Entrepreneurs ETF 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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