Correlation Between Financial Select and VCLO

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

Diversification Opportunities for Financial Select and VCLO

0.0

Correlation Coefficient

Financial Select  VCLO

Pay attention - limited upside

The 3 months correlation between Financial and VCLO is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Financial Select Sector and VCLO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VCLO 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 VCLO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VCLO has no effect on the direction of Financial Select i.e., Financial Select and VCLO go up and down completely randomly.

Pair Corralation between Financial Select and VCLO

If you would invest  3,740  in Financial Select Sector on October 2, 2024 and sell it today you would earn a total of  1,093  from holding Financial Select Sector or generate 29.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.4%
Values	Daily Returns

Financial Select Sector  vs.  VCLO

Financial Select Sector

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Select Sector are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Financial Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

VCLO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VCLO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, VCLO is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Financial Select and VCLO

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

The idea behind Financial Select Sector and VCLO 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.