Correlation Between Financial and Western Investment

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

Diversification Opportunities for Financial and Western Investment

-0.02

Correlation Coefficient

Financial  Western Investment

Good diversification

The 3 months correlation between Financial and Western is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment 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 Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of Financial i.e., Financial and Western Investment go up and down completely randomly.

Pair Corralation between Financial and Western Investment

Assuming the 90 days trading horizon Financial 15 Split is expected to generate 0.22 times more return on investment than Western Investment. However, Financial 15 Split is 4.63 times less risky than Western Investment. It trades about 0.35 of its potential returns per unit of risk. Western Investment is currently generating about 0.05 per unit of risk. If you would invest  790.00  in Financial 15 Split on September 12, 2024 and sell it today you would earn a total of  193.00  from holding Financial 15 Split or generate 24.43% return on investment over 90 days.

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

Financial 15 Split  vs.  Western Investment

Financial 15 Split

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Western Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Western Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Financial and Western Investment

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

The idea behind Financial 15 Split and Western Investment 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.