Correlation Between Energy Basic and Monthly Rebalance

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

By analyzing existing cross correlation between Energy Basic Materials and Monthly Rebalance Nasdaq 100, you can compare the effects of market volatilities on Energy Basic and Monthly Rebalance 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 Energy Basic with a short position of Monthly Rebalance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Basic and Monthly Rebalance.

Diversification Opportunities for Energy Basic and Monthly Rebalance

0.22

Correlation Coefficient

Energy Basic  Monthly Rebalance

Modest diversification

The 3 months correlation between Energy and Monthly is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Energy Basic Materials and Monthly Rebalance Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monthly Rebalance and Energy Basic 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 Energy Basic Materials are associated (or correlated) with Monthly Rebalance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monthly Rebalance has no effect on the direction of Energy Basic i.e., Energy Basic and Monthly Rebalance go up and down completely randomly.

Pair Corralation between Energy Basic and Monthly Rebalance

Assuming the 90 days horizon Energy Basic Materials is expected to generate 0.33 times more return on investment than Monthly Rebalance. However, Energy Basic Materials is 3.05 times less risky than Monthly Rebalance. It trades about 0.13 of its potential returns per unit of risk. Monthly Rebalance Nasdaq 100 is currently generating about -0.08 per unit of risk. If you would invest  1,147  in Energy Basic Materials on December 27, 2024 and sell it today you would earn a total of  86.00  from holding Energy Basic Materials or generate 7.5% return on investment over 90 days.

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

Energy Basic Materials  vs.  Monthly Rebalance Nasdaq 100

Energy Basic Materials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Basic Materials are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Energy Basic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Monthly Rebalance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monthly Rebalance Nasdaq 100 has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Energy Basic and Monthly Rebalance

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

The idea behind Energy Basic Materials and Monthly Rebalance Nasdaq 100 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.