Correlation Between Fundamental Income and ETRACS Monthly

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

By analyzing existing cross correlation between Fundamental Income Net and ETRACS Monthly Pay, you can compare the effects of market volatilities on Fundamental Income and ETRACS Monthly 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 Fundamental Income with a short position of ETRACS Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundamental Income and ETRACS Monthly.

Diversification Opportunities for Fundamental Income and ETRACS Monthly

0.53

Correlation Coefficient

Fundamental Income  ETRACS Monthly

Very weak diversification

The 3 months correlation between Fundamental and ETRACS is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Income Net and ETRACS Monthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Monthly Pay and Fundamental Income 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 Fundamental Income Net are associated (or correlated) with ETRACS Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Monthly Pay has no effect on the direction of Fundamental Income i.e., Fundamental Income and ETRACS Monthly go up and down completely randomly.

Pair Corralation between Fundamental Income and ETRACS Monthly

Given the investment horizon of 90 days Fundamental Income is expected to generate 3.12 times less return on investment than ETRACS Monthly. But when comparing it to its historical volatility, Fundamental Income Net is 1.64 times less risky than ETRACS Monthly. It trades about 0.08 of its potential returns per unit of risk. ETRACS Monthly Pay is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,345  in ETRACS Monthly Pay on May 27, 2025 and sell it today you would earn a total of  199.00  from holding ETRACS Monthly Pay or generate 14.8% return on investment over 90 days.

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

Fundamental Income Net  vs.  ETRACS Monthly Pay

Fundamental Income Net

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Fundamental Income Net are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Fundamental Income is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

ETRACS Monthly Pay

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Monthly Pay are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, ETRACS Monthly disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fundamental Income and ETRACS Monthly

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

The idea behind Fundamental Income Net and ETRACS Monthly Pay 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.