Correlation Between Dividend and Financial
Can any of the company-specific risk be diversified away by investing in both Dividend and Financial 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 Dividend and Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dividend 15 Split and Financial 15 Split, you can compare the effects of market volatilities on Dividend and Financial 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 Dividend with a short position of Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dividend and Financial.
Diversification Opportunities for Dividend and Financial
Very poor diversification
The 3 months correlation between Dividend and Financial is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dividend 15 Split and Financial 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial 15 Split and Dividend 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 Dividend 15 Split are associated (or correlated) with Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial 15 Split has no effect on the direction of Dividend i.e., Dividend and Financial go up and down completely randomly.
Pair Corralation between Dividend and Financial
Assuming the 90 days trading horizon Dividend 15 Split is expected to generate 1.66 times more return on investment than Financial. However, Dividend is 1.66 times more volatile than Financial 15 Split. It trades about 0.14 of its potential returns per unit of risk. Financial 15 Split is currently generating about 0.21 per unit of risk. If you would invest 301.00 in Dividend 15 Split on August 29, 2024 and sell it today you would earn a total of 368.00 from holding Dividend 15 Split or generate 122.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dividend 15 Split vs. Financial 15 Split
Performance |
| Timeline |
| Dividend 15 Split |
| Financial 15 Split |
Dividend and Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dividend and Financial
The main advantage of trading using opposite Dividend and Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dividend position performs unexpectedly, Financial 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 will offset losses from the drop in Financial's long position.| Dividend vs. Microsoft Corp CDR | Dividend vs. Apple Inc CDR | Dividend vs. Alphabet Inc CDR | Dividend vs. Amazon CDR |
| Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. North American Financial | Financial vs. Life Banc Split |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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