Correlation Between MLCX Biofuels and SP 500

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Can any of the company-specific risk be diversified away by investing in both MLCX Biofuels and SP 500 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 MLCX Biofuels and SP 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MLCX Biofuels Index and SP 500 Ishares, you can compare the effects of market volatilities on MLCX Biofuels and SP 500 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 MLCX Biofuels with a short position of SP 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of MLCX Biofuels and SP 500.

Diversification Opportunities for MLCX Biofuels and SP 500

-0.01
  Correlation Coefficient

Good diversification

The 3 months correlation between MLCX Biofuels and SP 500 is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding MLCX Biofuels Index and SP 500 Ishares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP 500 Ishares and MLCX Biofuels 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 MLCX Biofuels Index are associated (or correlated) with SP 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP 500 Ishares has no effect on the direction of MLCX Biofuels i.e., MLCX Biofuels and SP 500 go up and down completely randomly.

Pair Corralation between MLCX Biofuels and SP 500

Considering the 90-day investment horizon MLCX Biofuels is expected to generate 32.03 times less return on investment than SP 500. In addition to that, MLCX Biofuels is 2.85 times more volatile than SP 500 Ishares. It trades about 0.0 of its total potential returns per unit of risk. SP 500 Ishares is currently generating about 0.46 per unit of volatility. If you would invest  38,080  in SP 500 Ishares on May 14, 2022 and sell it today you would earn a total of  4,845  from holding SP 500 Ishares or generate 12.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

MLCX Biofuels Index  vs.  SP 500 Ishares

 Performance (%) 
       Timeline  
MLCX Biofuels Index 
MLCX Biofuels Performance
0 of 100
Over the last 90 days MLCX Biofuels Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Etf's basic indicators remain rather sound which may send shares a bit higher in September 2022. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

MLCX Biofuels Price Channel

SP 500 Ishares 
SP 500 Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in SP 500 Ishares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, SP 500 may actually be approaching a critical reversion point that can send shares even higher in September 2022.

SP 500 Price Channel

MLCX Biofuels and SP 500 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MLCX Biofuels and SP 500

The main advantage of trading using opposite MLCX Biofuels and SP 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MLCX Biofuels position performs unexpectedly, SP 500 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 SP 500 will offset losses from the drop in SP 500's long position.

MLCX Biofuels Index

Pair trading matchups for MLCX Biofuels

The idea behind MLCX Biofuels Index and SP 500 Ishares 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.

SP 500 Ishares

Pair trading matchups for SP 500

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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