Correlation Between Inverse Russell and Basic Materials
Can any of the company-specific risk be diversified away by investing in both Inverse Russell and Basic Materials 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 Russell and Basic Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse Russell 2000 and Basic Materials Fund, you can compare the effects of market volatilities on Inverse Russell and Basic Materials 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 Russell with a short position of Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Russell and Basic Materials.
Diversification Opportunities for Inverse Russell and Basic Materials
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Inverse and Basic is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Russell 2000 and Basic Materials Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials and Inverse Russell 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 Russell 2000 are associated (or correlated) with Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials has no effect on the direction of Inverse Russell i.e., Inverse Russell and Basic Materials go up and down completely randomly.
Pair Corralation between Inverse Russell and Basic Materials
Assuming the 90 days horizon Inverse Russell 2000 is expected to under-perform the Basic Materials. In addition to that, Inverse Russell is 1.33 times more volatile than Basic Materials Fund. It trades about -0.09 of its total potential returns per unit of risk. Basic Materials Fund is currently generating about 0.05 per unit of volatility. If you would invest 6,581 in Basic Materials Fund on August 30, 2024 and sell it today you would earn a total of 196.00 from holding Basic Materials Fund or generate 2.98% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Inverse Russell 2000 vs. Basic Materials Fund
Performance |
Timeline |
Inverse Russell 2000 |
Basic Materials |
Inverse Russell and Basic Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Inverse Russell and Basic Materials
The main advantage of trading using opposite Inverse Russell and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Russell position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.Inverse Russell vs. Technology Ultrasector Profund | Inverse Russell vs. Mfs Technology Fund | Inverse Russell vs. Global Technology Portfolio | Inverse Russell vs. Pgim Jennison Technology |
Basic Materials vs. Basic Materials Fund | Basic Materials vs. Energy Services Fund | Basic Materials vs. Energy Fund Class | Basic Materials vs. Basic Materials Fund |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. |