Correlation Between REX VolMAXX and IPath Series

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

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

Diversification Opportunities for REX VolMAXX and IPath Series

-0.55

Correlation Coefficient

REX VolMAXX  IPath Series

Excellent diversification

The 3 months correlation between REX and IPath is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding REX VolMAXX Long 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 REX VolMAXX 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 REX VolMAXX Long 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 REX VolMAXX i.e., REX VolMAXX and IPath Series go up and down completely randomly.

Pair Corralation between REX VolMAXX and IPath Series

Given the investment horizon of 90 days REX VolMAXX Long is expected to generate 0.26 times more return on investment than IPath Series. However, REX VolMAXX Long is 3.86 times less risky than IPath Series. It trades about 0.15 of its potential returns per unit of risk. iPath Series B is currently generating about -0.04 per unit of risk. If you would invest  4,251  in REX VolMAXX Long on February 6, 2024 and sell it today you would earn a total of  311.00  from holding REX VolMAXX Long or generate 7.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

REX VolMAXX Long  vs.  iPath Series B

REX VolMAXX Long

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in REX VolMAXX Long are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, REX VolMAXX may actually be approaching a critical reversion point that can send shares even higher in June 2024.

iPath Series B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iPath Series B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with REX VolMAXX and IPath Series

The main advantage of trading using opposite REX VolMAXX and IPath Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REX VolMAXX 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 REX VolMAXX Long 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.