Correlation Between Financial and Everyday People

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

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

Diversification Opportunities for Financial and Everyday People

0.4

Correlation Coefficient

Financial  Everyday People

Very weak diversification

The 3 months correlation between Financial and Everyday is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Everyday People Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everyday People Financial and Financial 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 15 Split are associated (or correlated) with Everyday People. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everyday People Financial has no effect on the direction of Financial i.e., Financial and Everyday People go up and down completely randomly.

Pair Corralation between Financial and Everyday People

Assuming the 90 days trading horizon Financial is expected to generate 8.02 times less return on investment than Everyday People. But when comparing it to its historical volatility, Financial 15 Split is 12.98 times less risky than Everyday People. It trades about 0.29 of its potential returns per unit of risk. Everyday People Financial is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Everyday People Financial on September 21, 2024 and sell it today you would earn a total of  16.00  from holding Everyday People Financial or generate 42.11% return on investment over 90 days.

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

Financial 15 Split  vs.  Everyday People Financial

Financial 15 Split

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Everyday People Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Everyday People Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Everyday People showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Financial and Everyday People

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

The idea behind Financial 15 Split and Everyday People Financial 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.