Correlation Between Applied Finance and Applied Finance
Can any of the company-specific risk be diversified away by investing in both Applied Finance and Applied Finance 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 Applied Finance and Applied Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Core and Applied Finance Select, you can compare the effects of market volatilities on Applied Finance and Applied Finance 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 Applied Finance with a short position of Applied Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Applied Finance.
Diversification Opportunities for Applied Finance and Applied Finance
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Applied and Applied is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Core and Applied Finance Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Finance Select and Applied Finance 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 Applied Finance Core are associated (or correlated) with Applied Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Finance Select has no effect on the direction of Applied Finance i.e., Applied Finance and Applied Finance go up and down completely randomly.
Pair Corralation between Applied Finance and Applied Finance
Assuming the 90 days horizon Applied Finance Core is expected to generate 1.12 times more return on investment than Applied Finance. However, Applied Finance is 1.12 times more volatile than Applied Finance Select. It trades about 0.19 of its potential returns per unit of risk. Applied Finance Select is currently generating about 0.21 per unit of risk. If you would invest 1,217 in Applied Finance Core on August 28, 2024 and sell it today you would earn a total of 45.00 from holding Applied Finance Core or generate 3.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Finance Core vs. Applied Finance Select
Performance |
| Timeline |
| Applied Finance Core |
| Applied Finance Select |
Applied Finance and Applied Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Finance and Applied Finance
The main advantage of trading using opposite Applied Finance and Applied Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance position performs unexpectedly, Applied Finance 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 Applied Finance will offset losses from the drop in Applied Finance's long position.| Applied Finance vs. Applied Finance Explorer | Applied Finance vs. Needham Small Cap | Applied Finance vs. The Brown Capital | Applied Finance vs. Thrivent Small Cap |
| Applied Finance vs. Applied Finance Explorer | Applied Finance vs. Needham Small Cap | Applied Finance vs. The Brown Capital | Applied Finance vs. Thrivent Small Cap |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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