Correlation Between Micro E and 30 Year

Can any of the company-specific risk be diversified away by investing in both Micro E and 30 Year 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 Micro E and 30 Year into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Micro E mini Russell and 30 Year Treasury, you can compare the effects of market volatilities on Micro E and 30 Year 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 Micro E with a short position of 30 Year. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micro E and 30 Year.

Diversification Opportunities for Micro E and 30 Year

-0.68

Correlation Coefficient

Micro E  30 Year

Excellent diversification

The 3 months correlation between Micro and ZBUSD is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Micro E mini Russell and 30 Year Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 30 Year Treasury and Micro E 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 Micro E mini Russell are associated (or correlated) with 30 Year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 30 Year Treasury has no effect on the direction of Micro E i.e., Micro E and 30 Year go up and down completely randomly.

Pair Corralation between Micro E and 30 Year

Assuming the 90 days trading horizon Micro E mini Russell is expected to under-perform the 30 Year. In addition to that, Micro E is 2.0 times more volatile than 30 Year Treasury. It trades about -0.13 of its total potential returns per unit of risk. 30 Year Treasury is currently generating about 0.07 per unit of volatility. If you would invest  11,409  in 30 Year Treasury on December 29, 2024 and sell it today you would earn a total of  300.00  from holding 30 Year Treasury or generate 2.63% return on investment over 90 days.

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

Micro E mini Russell  vs.  30 Year Treasury

Micro E mini

Risk-Adjusted Performance

Very Weak

Over the last 90 days Micro E mini Russell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Commodity's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Micro E mini Russell shareholders.

30 Year Treasury

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 30 Year Treasury are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, 30 Year is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Micro E and 30 Year

The main advantage of trading using opposite Micro E and 30 Year positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micro E position performs unexpectedly, 30 Year 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 30 Year will offset losses from the drop in 30 Year's long position.

The idea behind Micro E mini Russell and 30 Year Treasury 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.