Correlation Between Finance Of and OneMain Holdings

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

By analyzing existing cross correlation between Finance of America and OneMain Holdings, you can compare the effects of market volatilities on Finance Of and OneMain Holdings 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 Finance Of with a short position of OneMain Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Finance Of and OneMain Holdings.

Diversification Opportunities for Finance Of and OneMain Holdings

0.67

Correlation Coefficient

Finance Of  OneMain Holdings

Poor diversification

The 3 months correlation between Finance and OneMain is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Finance of America and OneMain Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OneMain Holdings and Finance Of 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 Finance of America are associated (or correlated) with OneMain Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OneMain Holdings has no effect on the direction of Finance Of i.e., Finance Of and OneMain Holdings go up and down completely randomly.

Pair Corralation between Finance Of and OneMain Holdings

Considering the 90-day investment horizon Finance of America is expected to generate 3.66 times more return on investment than OneMain Holdings. However, Finance Of is 3.66 times more volatile than OneMain Holdings. It trades about 0.2 of its potential returns per unit of risk. OneMain Holdings is currently generating about -0.18 per unit of risk. If you would invest  2,419  in Finance of America on October 12, 2024 and sell it today you would earn a total of  521.00  from holding Finance of America or generate 21.54% return on investment over 90 days.

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

Finance of America  vs.  OneMain Holdings

Finance of America

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Finance of America are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Finance Of sustained solid returns over the last few months and may actually be approaching a breakup point.

OneMain Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OneMain Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting primary indicators, OneMain Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Finance Of and OneMain Holdings

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

The idea behind Finance of America and OneMain Holdings 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.