Correlation Between Technology Fund and Commodities Strategy

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

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

Diversification Opportunities for Technology Fund and Commodities Strategy

0.56

Correlation Coefficient

Technology Fund  Commodities Strategy

Very weak diversification

The 3 months correlation between Technology and Commodities is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Technology Fund Class and Commodities Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodities Strategy and Technology Fund 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 Technology Fund Class 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 Technology Fund i.e., Technology Fund and Commodities Strategy go up and down completely randomly.

Pair Corralation between Technology Fund and Commodities Strategy

Assuming the 90 days horizon Technology Fund Class is expected to generate 0.98 times more return on investment than Commodities Strategy. However, Technology Fund Class is 1.02 times less risky than Commodities Strategy. It trades about 0.3 of its potential returns per unit of risk. Commodities Strategy Fund is currently generating about 0.12 per unit of risk. If you would invest  14,310  in Technology Fund Class on May 2, 2025 and sell it today you would earn a total of  2,973  from holding Technology Fund Class or generate 20.78% return on investment over 90 days.

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

Technology Fund Class  vs.  Commodities Strategy Fund

Technology Fund Class

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Fund Class are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Technology Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Commodities Strategy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commodities Strategy Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Commodities Strategy may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Technology Fund and Commodities Strategy

The main advantage of trading using opposite Technology Fund and Commodities Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Fund 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 Technology Fund Class 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.