Correlation Between Main Buywrite and ETC 6

Can any of the company-specific risk be diversified away by investing in both Main Buywrite and ETC 6 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 Main Buywrite and ETC 6 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Main Buywrite ETF and ETC 6 Meridian, you can compare the effects of market volatilities on Main Buywrite and ETC 6 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 Main Buywrite with a short position of ETC 6. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Buywrite and ETC 6.

Diversification Opportunities for Main Buywrite and ETC 6

0.58

Correlation Coefficient

Main Buywrite  ETC 6

Very weak diversification

The 3 months correlation between Main and ETC is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Main Buywrite ETF and ETC 6 Meridian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETC 6 Meridian and Main Buywrite 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 Main Buywrite ETF are associated (or correlated) with ETC 6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETC 6 Meridian has no effect on the direction of Main Buywrite i.e., Main Buywrite and ETC 6 go up and down completely randomly.

Pair Corralation between Main Buywrite and ETC 6

Given the investment horizon of 90 days Main Buywrite ETF is expected to under-perform the ETC 6. In addition to that, Main Buywrite is 1.12 times more volatile than ETC 6 Meridian. It trades about -0.02 of its total potential returns per unit of risk. ETC 6 Meridian is currently generating about 0.02 per unit of volatility. If you would invest  3,809  in ETC 6 Meridian on January 27, 2025 and sell it today you would earn a total of  49.00  from holding ETC 6 Meridian or generate 1.29% return on investment over 90 days.

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

Main Buywrite ETF  vs.  ETC 6 Meridian

Main Buywrite ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Main Buywrite ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Main Buywrite is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ETC 6 Meridian

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ETC 6 Meridian are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, ETC 6 is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Main Buywrite and ETC 6

The main advantage of trading using opposite Main Buywrite and ETC 6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Buywrite position performs unexpectedly, ETC 6 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 ETC 6 will offset losses from the drop in ETC 6's long position.

The idea behind Main Buywrite ETF and ETC 6 Meridian 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..