Correlation Between Dividend Growth and Financial
Can any of the company-specific risk be diversified away by investing in both Dividend Growth 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 Growth and Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dividend Growth Split and Financial 15 Split, you can compare the effects of market volatilities on Dividend Growth 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 Growth with a short position of Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dividend Growth and Financial.
Diversification Opportunities for Dividend Growth and Financial
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dividend and Financial is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dividend Growth 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 Growth 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 Growth 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 Growth i.e., Dividend Growth and Financial go up and down completely randomly.
Pair Corralation between Dividend Growth and Financial
Assuming the 90 days trading horizon Dividend Growth is expected to generate 1.31 times less return on investment than Financial. In addition to that, Dividend Growth is 1.8 times more volatile than Financial 15 Split. It trades about 0.16 of its total potential returns per unit of risk. Financial 15 Split is currently generating about 0.37 per unit of volatility. If you would invest 1,034 in Financial 15 Split on August 27, 2024 and sell it today you would earn a total of 31.00 from holding Financial 15 Split or generate 3.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dividend Growth Split vs. Financial 15 Split
Performance |
| Timeline |
| Dividend Growth Split |
| Financial 15 Split |
Dividend Growth and Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dividend Growth and Financial
The main advantage of trading using opposite Dividend Growth and Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dividend Growth 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 Growth vs. JPMorgan Chase Co | Dividend Growth vs. Bank of America | Dividend Growth vs. Royal Bank of | Dividend Growth vs. Royal Bank of |
| Financial vs. North American Financial | Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. Dividend 15 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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