Correlation Between Inverse Dow and Commodities Strategy

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

By analyzing existing cross correlation between Inverse Dow 2x and Commodities Strategy Fund, you can compare the effects of market volatilities on Inverse Dow 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 Inverse Dow with a short position of Commodities Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Dow and Commodities Strategy.

Diversification Opportunities for Inverse Dow and Commodities Strategy

0.0

Correlation Coefficient

Inverse Dow  Commodities Strategy

Pay attention - limited upside

The 3 months correlation between Inverse and Commodities is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Dow 2x and Commodities Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodities Strategy and Inverse Dow 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 Inverse Dow 2x 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 Inverse Dow i.e., Inverse Dow and Commodities Strategy go up and down completely randomly.

Pair Corralation between Inverse Dow and Commodities Strategy

If you would invest  0.00  in Inverse Dow 2x on February 3, 2025 and sell it today you would earn a total of  0.00  from holding Inverse Dow 2x or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Inverse Dow 2x  vs.  Commodities Strategy Fund

Inverse Dow 2x

Risk-Adjusted Performance

Modest

Over the last 90 days Inverse Dow 2x has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Inverse Dow is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 Inverse Dow and Commodities Strategy

The main advantage of trading using opposite Inverse Dow and Commodities Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Dow 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 Inverse Dow 2x 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.