Correlation Between Financial Industries and Eic Value

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

Diversification Opportunities for Financial Industries and Eic Value

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Financial and Eic is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Eic Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eic Value Fund and Financial Industries 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 Financial Industries Fund are associated (or correlated) with Eic Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eic Value Fund has no effect on the direction of Financial Industries i.e., Financial Industries and Eic Value go up and down completely randomly.

Pair Corralation between Financial Industries and Eic Value

Assuming the 90 days horizon Financial Industries Fund is expected to generate 1.52 times more return on investment than Eic Value. However, Financial Industries is 1.52 times more volatile than Eic Value Fund. It trades about 0.0 of its potential returns per unit of risk. Eic Value Fund is currently generating about -0.07 per unit of risk. If you would invest  1,907  in Financial Industries Fund on October 26, 2024 and sell it today you would lose (9.00) from holding Financial Industries Fund or give up 0.47% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Financial Industries Fund  vs.  Eic Value Fund

 Performance 
       Timeline  
Financial Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Financial Industries Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Financial Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Eic Value Fund 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Eic Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Eic Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Financial Industries and Eic Value Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Financial Industries and Eic Value

The main advantage of trading using opposite Financial Industries and Eic Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Industries position performs unexpectedly, Eic Value 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 Eic Value will offset losses from the drop in Eic Value's long position.
The idea behind Financial Industries Fund and Eic Value Fund 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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