Correlation Between Dividend and US Financial

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

By analyzing existing cross correlation between Dividend 15 Split and US Financial 15, you can compare the effects of market volatilities on Dividend and US Financial 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 Dividend with a short position of US Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dividend and US Financial.

Diversification Opportunities for Dividend and US Financial

0.65

Correlation Coefficient

Dividend  US Financial

Poor diversification

The 3 months correlation between Dividend and FTU-PB is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dividend 15 Split and US Financial 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Financial 15 and Dividend 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 Dividend 15 Split are associated (or correlated) with US Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Financial 15 has no effect on the direction of Dividend i.e., Dividend and US Financial go up and down completely randomly.

Pair Corralation between Dividend and US Financial

Assuming the 90 days trading horizon Dividend 15 Split is expected to generate 0.39 times more return on investment than US Financial. However, Dividend 15 Split is 2.6 times less risky than US Financial. It trades about 0.31 of its potential returns per unit of risk. US Financial 15 is currently generating about -0.27 per unit of risk. If you would invest  1,045  in Dividend 15 Split on October 9, 2024 and sell it today you would earn a total of  27.00  from holding Dividend 15 Split or generate 2.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Dividend 15 Split  vs.  US Financial 15

Dividend 15 Split

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dividend 15 Split are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Dividend is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

US Financial 15

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Financial 15 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, US Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dividend and US Financial

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

The idea behind Dividend 15 Split and US Financial 15 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.