Correlation Between US Financial and INTEL CDR

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

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

Diversification Opportunities for US Financial and INTEL CDR

-0.03

Correlation Coefficient

US Financial  INTEL CDR

Good diversification

The 3 months correlation between FTU-PB and INTEL is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding US Financial 15 and INTEL CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTEL CDR and US 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 US Financial 15 are associated (or correlated) with INTEL CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTEL CDR has no effect on the direction of US Financial i.e., US Financial and INTEL CDR go up and down completely randomly.

Pair Corralation between US Financial and INTEL CDR

Assuming the 90 days trading horizon US Financial 15 is expected to under-perform the INTEL CDR. But the preferred stock apears to be less risky and, when comparing its historical volatility, US Financial 15 is 2.61 times less risky than INTEL CDR. The preferred stock trades about -0.02 of its potential returns per unit of risk. The INTEL CDR is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,190  in INTEL CDR on December 24, 2024 and sell it today you would earn a total of  219.00  from holding INTEL CDR or generate 18.4% return on investment over 90 days.

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

US Financial 15  vs.  INTEL CDR

US Financial 15

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Financial 15 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, US Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

INTEL CDR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INTEL CDR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, INTEL CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Financial and INTEL CDR

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

The idea behind US Financial 15 and INTEL CDR 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.