Correlation Between Financial Industries and Fisher Investments

Can any of the company-specific risk be diversified away by investing in both Financial Industries and Fisher Investments 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 Fisher Investments 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 Fisher Small Cap, you can compare the effects of market volatilities on Financial Industries and Fisher Investments 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 Fisher Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Industries and Fisher Investments.

Diversification Opportunities for Financial Industries and Fisher Investments

0.83

Correlation Coefficient

Financial Industries  Fisher Investments

Very poor diversification

The 3 months correlation between Financial and Fisher is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Fisher Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fisher Investments 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 Fisher Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fisher Investments has no effect on the direction of Financial Industries i.e., Financial Industries and Fisher Investments go up and down completely randomly.

Pair Corralation between Financial Industries and Fisher Investments

Assuming the 90 days horizon Financial Industries Fund is expected to generate 0.88 times more return on investment than Fisher Investments. However, Financial Industries Fund is 1.14 times less risky than Fisher Investments. It trades about 0.04 of its potential returns per unit of risk. Fisher Small Cap is currently generating about 0.02 per unit of risk. If you would invest  1,524  in Financial Industries Fund on October 24, 2024 and sell it today you would earn a total of  374.00  from holding Financial Industries Fund or generate 24.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Financial Industries Fund  vs.  Fisher Small Cap

Financial Industries

Risk-Adjusted Performance

0 of 100

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.

Fisher Investments

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fisher Small Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Fisher Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Financial Industries and Fisher Investments

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

The idea behind Financial Industries Fund and Fisher Small Cap 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.