Correlation Between All Asset and Commodityrealreturn

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

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

Diversification Opportunities for All Asset and Commodityrealreturn

-0.5

Correlation Coefficient

All Asset  Commodityrealreturn

Very good diversification

The 3 months correlation between All and Commodityrealreturn is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding All Asset Fund and Commodityrealreturn Strategy F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodityrealreturn and All Asset 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 All Asset Fund are associated (or correlated) with Commodityrealreturn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodityrealreturn has no effect on the direction of All Asset i.e., All Asset and Commodityrealreturn go up and down completely randomly.

Pair Corralation between All Asset and Commodityrealreturn

Assuming the 90 days horizon All Asset Fund is expected to generate 0.44 times more return on investment than Commodityrealreturn. However, All Asset Fund is 2.27 times less risky than Commodityrealreturn. It trades about 0.14 of its potential returns per unit of risk. Commodityrealreturn Strategy Fund is currently generating about 0.03 per unit of risk. If you would invest  1,074  in All Asset Fund on June 22, 2024 and sell it today you would earn a total of  63.00  from holding All Asset Fund or generate 5.87% return on investment over 90 days.

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

All Asset Fund  vs.  Commodityrealreturn Strategy F

All Asset Fund

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in All Asset Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, All Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Commodityrealreturn

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with All Asset and Commodityrealreturn

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

The idea behind All Asset Fund and Commodityrealreturn 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.

Check out your portfolio center.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.