All three of the major stock indices, the Dow, S&P 500 and Nasdaq hit new all time highs last week. It has been a slow grind upward that has crushed Implied Volatility (IV) and resulted in very low IV Rank (IVR). This has led us to pay more attention to Futures contracts and their corresponding ETFs. We compiled some information on them that we are sure you will find of interest. How many shares of an ETF equals its Futures contract. What is the correlation between the Future and the ETF? What is the correlation between the different ETFs?
A table of the Index Futures and Bond Futures, their corresponding ETFs and the correlation was displayed. The table showed the amount of shares needed to offset 1 Futures contract. It also showed the high correlation between the Futures and their ETFS. A second table displayed commodity Futures and their ETFs. A third table displayed currencies and their correlated ETFs. A list of the commodity ETFs that suffer from Drag due to the Futures being in a state of Contango was also provided. Currently, drag is not a problem for the vast majority.
A table of the short term correlations (3-months) and the long term correlations (12-months) of the Futures and ETFs listed was displayed. This makes a great reference guide for trading. It can be used to make sure your portfolio is truly diversified. The Best Practices from October 19, 2015, "Understanding Correlation" is one of several segments we have done covering correlation. The correlation tables can also be used to find possible Pairs Trading ideas.
Watch this segment of Options Jive with Tom Sosnoff and Tony Battista for the great reference tools and a better understanding of ETFs on Futures including their correlations to each other, their correlation to the different ETFs and their share equivalents.
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