Correlation Between Rising Rates and Falling Dollar
Can any of the company-specific risk be diversified away by investing in both Rising Rates and Falling Dollar 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 Rising Rates and Falling Dollar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rising Rates Opportunity and Falling Dollar Profund, you can compare the effects of market volatilities on Rising Rates and Falling Dollar 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 Rising Rates with a short position of Falling Dollar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rising Rates and Falling Dollar.
Diversification Opportunities for Rising Rates and Falling Dollar
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rising and Falling is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Rising Rates Opportunity and Falling Dollar Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falling Dollar Profund and Rising Rates 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 Rising Rates Opportunity are associated (or correlated) with Falling Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falling Dollar Profund has no effect on the direction of Rising Rates i.e., Rising Rates and Falling Dollar go up and down completely randomly.
Pair Corralation between Rising Rates and Falling Dollar
Assuming the 90 days horizon Rising Rates is expected to generate 1.2 times less return on investment than Falling Dollar. In addition to that, Rising Rates is 1.93 times more volatile than Falling Dollar Profund. It trades about 0.06 of its total potential returns per unit of risk. Falling Dollar Profund is currently generating about 0.14 per unit of volatility. If you would invest 1,326 in Falling Dollar Profund on March 23, 2025 and sell it today you would earn a total of 73.00 from holding Falling Dollar Profund or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rising Rates Opportunity vs. Falling Dollar Profund
Performance |
| Timeline |
| Rising Rates Opportunity |
| Falling Dollar Profund |
Rising Rates and Falling Dollar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rising Rates and Falling Dollar
The main advantage of trading using opposite Rising Rates and Falling Dollar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rising Rates position performs unexpectedly, Falling Dollar 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 Falling Dollar will offset losses from the drop in Falling Dollar's long position.| Rising Rates vs. Templeton Global Balanced | Rising Rates vs. Calvert Global Energy | Rising Rates vs. Ab Global Risk | Rising Rates vs. Morgan Stanley Global |
| Falling Dollar vs. Prudential High Yield | Falling Dollar vs. High Yield Fund Investor | Falling Dollar vs. Transamerica High Yield | Falling Dollar vs. Multi Manager High Yield |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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