Correlation Between Dow 2x and Realestaterealreturn

Can any of the company-specific risk be diversified away by investing in both Dow 2x and Realestaterealreturn 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 Dow 2x and Realestaterealreturn into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dow 2x Strategy and Realestaterealreturn Strategy Fund, you can compare the effects of market volatilities on Dow 2x and Realestaterealreturn 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 Dow 2x with a short position of Realestaterealreturn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow 2x and Realestaterealreturn.

Diversification Opportunities for Dow 2x and Realestaterealreturn

0.4

Correlation Coefficient

Dow 2x  Realestaterealreturn

Very weak diversification

The 3 months correlation between Dow and Realestaterealreturn is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Dow 2x Strategy and Realestaterealreturn Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realestaterealreturn and Dow 2x 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 Dow 2x Strategy are associated (or correlated) with Realestaterealreturn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realestaterealreturn has no effect on the direction of Dow 2x i.e., Dow 2x and Realestaterealreturn go up and down completely randomly.

Pair Corralation between Dow 2x and Realestaterealreturn

Assuming the 90 days horizon Dow 2x Strategy is expected to under-perform the Realestaterealreturn. In addition to that, Dow 2x is 1.52 times more volatile than Realestaterealreturn Strategy Fund. It trades about -0.04 of its total potential returns per unit of risk. Realestaterealreturn Strategy Fund is currently generating about 0.01 per unit of volatility. If you would invest  2,636  in Realestaterealreturn Strategy Fund on December 25, 2024 and sell it today you would earn a total of  6.00  from holding Realestaterealreturn Strategy Fund or generate 0.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Dow 2x Strategy  vs.  Realestaterealreturn Strategy

Dow 2x Strategy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dow 2x Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Dow 2x is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Realestaterealreturn

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Dow 2x and Realestaterealreturn

The main advantage of trading using opposite Dow 2x and Realestaterealreturn positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow 2x position performs unexpectedly, Realestaterealreturn 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 Realestaterealreturn will offset losses from the drop in Realestaterealreturn's long position.

The idea behind Dow 2x Strategy and Realestaterealreturn Strategy 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.