Correlation Between Class III and US Dollar

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

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

Diversification Opportunities for Class III and US Dollar

-0.78

Correlation Coefficient

Class III  US Dollar

Pay attention - limited upside

The 3 months correlation between Class and DXUSD is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Class III Milk and US Dollar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Dollar and Class III 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 Class III Milk are associated (or correlated) with US Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Dollar has no effect on the direction of Class III i.e., Class III and US Dollar go up and down completely randomly.

Pair Corralation between Class III and US Dollar

Assuming the 90 days horizon Class III Milk is expected to under-perform the US Dollar. In addition to that, Class III is 2.84 times more volatile than US Dollar. It trades about -0.27 of its total potential returns per unit of risk. US Dollar is currently generating about 0.18 per unit of volatility. If you would invest  10,386  in US Dollar on August 31, 2024 and sell it today you would earn a total of  227.00  from holding US Dollar or generate 2.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Class III Milk  vs.  US Dollar

Class III Milk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Class III Milk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Commodity's basic indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for Class III Milk shareholders.

US Dollar

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Dollar are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, US Dollar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Class III and US Dollar

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

The idea behind Class III Milk and US Dollar 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.