Correlation Between Sp Midcap and Commodities Strategy

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

By analyzing existing cross correlation between Sp Midcap 400 and Commodities Strategy Fund, you can compare the effects of market volatilities on Sp Midcap and Commodities Strategy 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 Sp Midcap with a short position of Commodities Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Midcap and Commodities Strategy.

Diversification Opportunities for Sp Midcap and Commodities Strategy

0.76

Correlation Coefficient

Sp Midcap  Commodities Strategy

Poor diversification

The 3 months correlation between RYBHX and Commodities is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sp Midcap 400 and Commodities Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodities Strategy and Sp Midcap 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 Sp Midcap 400 are associated (or correlated) with Commodities Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodities Strategy has no effect on the direction of Sp Midcap i.e., Sp Midcap and Commodities Strategy go up and down completely randomly.

Pair Corralation between Sp Midcap and Commodities Strategy

Assuming the 90 days horizon Sp Midcap 400 is expected to generate 1.82 times more return on investment than Commodities Strategy. However, Sp Midcap is 1.82 times more volatile than Commodities Strategy Fund. It trades about -0.05 of its potential returns per unit of risk. Commodities Strategy Fund is currently generating about -0.1 per unit of risk. If you would invest  5,069  in Sp Midcap 400 on February 3, 2025 and sell it today you would lose (405.00) from holding Sp Midcap 400 or give up 7.99% of portfolio value over 90 days.

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

Sp Midcap 400  vs.  Commodities Strategy Fund

Sp Midcap 400

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sp Midcap 400 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Commodities Strategy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Commodities Strategy Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest abnormal performance, the Fund's forward-looking indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Sp Midcap and Commodities Strategy

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

The idea behind Sp Midcap 400 and Commodities 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.