This module allows you to analyze existing cross correlation between DOW and iPath Pure Beta Broad Commodity ETN. You can compare the effects of market volatilities on DOW and iPath Pure 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 DOW with a short position of iPath Pure. See also your portfolio center. Please also check ongoing floating volatility patterns of DOW and iPath Pure.
Given the investment horizon of 30 days, DOW is expected to generate 0.78 times more return on investment than iPath Pure. However, DOW is 1.28 times less risky than iPath Pure. It trades about 0.1 of its potential returns per unit of risk. iPath Pure Beta Broad Commodity ETN is currently generating about -0.2 per unit of risk. If you would invest 2,465,780 in DOW on June 20, 2018 and sell it today you would earn a total of 40,670 from holding DOW or generate 1.65% return on investment over 30 days.
Overlapping area represents the amount of risk that can be diversified away by holding DOW and iPath Pure Beta Broad Commodit in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on iPath Pure Beta and 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 DOW are associated (or correlated) with iPath Pure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iPath Pure Beta has no effect on the direction of DOW i.e. DOW and iPath Pure go up and down completely randomly.
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