Correlation Between Financial Industries and Financial Industries

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

Diversification Opportunities for Financial Industries and Financial Industries

1.0

Correlation Coefficient

Financial Industries  Financial Industries

No risk reduction

The 3 months correlation between Financial and Financial is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries 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 Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Financial Industries i.e., Financial Industries and Financial Industries go up and down completely randomly.

Pair Corralation between Financial Industries and Financial Industries

Assuming the 90 days horizon Financial Industries Fund is expected to generate 0.93 times more return on investment than Financial Industries. However, Financial Industries Fund is 1.08 times less risky than Financial Industries. It trades about -0.18 of its potential returns per unit of risk. Financial Industries Fund is currently generating about -0.18 per unit of risk. If you would invest  2,031  in Financial Industries Fund on December 11, 2024 and sell it today you would lose (311.00) from holding Financial Industries Fund or give up 15.31% of portfolio value over 90 days.

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

Financial Industries Fund  vs.  Financial Industries Fund

Financial Industries

Risk-Adjusted Performance

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 weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Financial Industries

Risk-Adjusted Performance

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 weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Financial Industries and Financial Industries

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

The idea behind Financial Industries Fund and Financial Industries Fund 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.