Correlation Between Financial Select and TrueShares Technology

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

By analyzing existing cross correlation between Financial Select Sector and TrueShares Technology AI, you can compare the effects of market volatilities on Financial Select and TrueShares Technology 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 Select with a short position of TrueShares Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Select and TrueShares Technology.

Diversification Opportunities for Financial Select and TrueShares Technology

0.88

Correlation Coefficient

Financial Select  TrueShares Technology

Very poor diversification

The 3 months correlation between Financial and TrueShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Financial Select Sector and TrueShares Technology AI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TrueShares Technology and Financial Select 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 Select Sector are associated (or correlated) with TrueShares Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TrueShares Technology has no effect on the direction of Financial Select i.e., Financial Select and TrueShares Technology go up and down completely randomly.

Pair Corralation between Financial Select and TrueShares Technology

Considering the 90-day investment horizon Financial Select is expected to generate 1.36 times less return on investment than TrueShares Technology. But when comparing it to its historical volatility, Financial Select Sector is 1.85 times less risky than TrueShares Technology. It trades about 0.08 of its potential returns per unit of risk. TrueShares Technology AI is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,737  in TrueShares Technology AI on September 27, 2024 and sell it today you would earn a total of  1,313  from holding TrueShares Technology AI or generate 47.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Financial Select Sector  vs.  TrueShares Technology AI

Financial Select Sector

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Select Sector are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Financial Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TrueShares Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TrueShares Technology AI are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, TrueShares Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Financial Select and TrueShares Technology

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

The idea behind Financial Select Sector and TrueShares Technology AI 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..