Correlation Between Inverse Sp and Telecommunications

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

By analyzing existing cross correlation between Inverse Sp 500 and Telecommunications Fund Class, you can compare the effects of market volatilities on Inverse Sp and Telecommunications 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 Inverse Sp with a short position of Telecommunications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Sp and Telecommunications.

Diversification Opportunities for Inverse Sp and Telecommunications

-0.94

Correlation Coefficient

Inverse Sp  Telecommunications

Pay attention - limited upside

The 3 months correlation between Inverse and Telecommunications is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Sp 500 and Telecommunications Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecommunications and Inverse Sp 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 Inverse Sp 500 are associated (or correlated) with Telecommunications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecommunications has no effect on the direction of Inverse Sp i.e., Inverse Sp and Telecommunications go up and down completely randomly.

Pair Corralation between Inverse Sp and Telecommunications

Assuming the 90 days horizon Inverse Sp 500 is expected to under-perform the Telecommunications. But the mutual fund apears to be less risky and, when comparing its historical volatility, Inverse Sp 500 is 1.06 times less risky than Telecommunications. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Telecommunications Fund Class is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,619  in Telecommunications Fund Class on August 30, 2024 and sell it today you would earn a total of  417.00  from holding Telecommunications Fund Class or generate 11.52% return on investment over 90 days.

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

Inverse Sp 500  vs.  Telecommunications Fund Class

Inverse Sp 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inverse Sp 500 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Inverse Sp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Telecommunications

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telecommunications Fund Class are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Telecommunications may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Inverse Sp and Telecommunications

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

The idea behind Inverse Sp 500 and Telecommunications Fund Class 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.