Correlation Between PowerShares and PowerShares Dynamic

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

By analyzing existing cross correlation between PowerShares DB Crude and PowerShares Dynamic Hardware, you can compare the effects of market volatilities on PowerShares and PowerShares Dynamic 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 PowerShares with a short position of PowerShares Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of PowerShares and PowerShares Dynamic.

Diversification Opportunities for PowerShares and PowerShares Dynamic

0.0

Correlation Coefficient

PowerShares  PowerShares Dynamic

Pay attention - limited upside

The 3 months correlation between PowerShares and PowerShares is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding PowerShares DB Crude and PowerShares Dynamic Hardware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PowerShares Dynamic and PowerShares 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 PowerShares DB Crude are associated (or correlated) with PowerShares Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PowerShares Dynamic has no effect on the direction of PowerShares i.e., PowerShares and PowerShares Dynamic go up and down completely randomly.

Pair Corralation between PowerShares and PowerShares Dynamic

If you would invest (100.00) in PowerShares Dynamic Hardware on September 16, 2024 and sell it today you would earn a total of  100.00  from holding PowerShares Dynamic Hardware or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

PowerShares DB Crude  vs.  PowerShares Dynamic Hardware

PowerShares DB Crude

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PowerShares DB Crude has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, PowerShares is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

PowerShares Dynamic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PowerShares Dynamic Hardware has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical indicators, PowerShares Dynamic is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with PowerShares and PowerShares Dynamic

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

The idea behind PowerShares DB Crude and PowerShares Dynamic Hardware 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.