Correlation Between United States and IPath Series

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

By analyzing existing cross correlation between United States Oil and iPath Series B, you can compare the effects of market volatilities on United States and IPath Series 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 United States with a short position of IPath Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and IPath Series.

Diversification Opportunities for United States and IPath Series

-0.43

Correlation Coefficient

United States  IPath Series

Very good diversification

The 3 months correlation between United and IPath is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding United States Oil and iPath Series B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iPath Series B and United States 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 United States Oil are associated (or correlated) with IPath Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iPath Series B has no effect on the direction of United States i.e., United States and IPath Series go up and down completely randomly.

Pair Corralation between United States and IPath Series

Considering the 90-day investment horizon United States Oil is expected to under-perform the IPath Series. In addition to that, United States is 1.04 times more volatile than iPath Series B. It trades about -0.03 of its total potential returns per unit of risk. iPath Series B is currently generating about 0.01 per unit of volatility. If you would invest  2,647  in iPath Series B on September 22, 2024 and sell it today you would lose (24.00) from holding iPath Series B or give up 0.91% of portfolio value over 90 days.

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

United States Oil  vs.  iPath Series B

United States Oil

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United States Oil are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, United States is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

iPath Series B

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iPath Series B are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IPath Series is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with United States and IPath Series

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

The idea behind United States Oil and iPath Series B 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.